## 1. Institutional Coverage of Public Sector Gross Debt in Moldova

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---

### Summary of mission outcomes and priority recommendations
- A Public-Sector Debt Statistics (PSDS) technical assistance (TA) mission was conducted in Chisinau during April 2–6, 2018, to evaluate comprehensiveness of public sector debt statistics in terms of:
  - (i) institutional coverage;
  - (ii) instrument coverage, including maturity structures;
  - (iii) valuation of debt liabilities; and
  - (iv) additional fiscal risks from contingent liabilities (on-lending and guarantees).
- The mission found Moldova continues to improve recording, compilation and dissemination of public sector debt statistics but faces five main statistical challenges:
  - (i) The collection, compilation and dissemination of gross debt statistics for extrabudgetary units (EBU).
  - (ii) The collection, compilation and dissemination of gross debt statistics for social security funds (SSF).
  - (iii) Expansion of coverage for public corporations’ gross debt statistics to include short term liabilities (currently only long term gross debt statistics are being reported for both financial and nonfinancial public corporations).
  - (iv) Expansion of coverage for local governments gross debt statistics to include short term liabilities (currently only long term gross debt statistics are being reported).
  - (v) The recording of gross debt at nominal value for all instruments. Currently Moldova is reporting gross debt as outstanding principal which does not include accrued interest.
- Adoption of these five recommendations plus comprehensive monitoring of on-lending and contingent liabilities would increase policymakers’ ability to forecast fiscal risk and monitor gross debt in line with the Fiscal Risk Statement (FRS).

Priority recommendations (action plan highlights)
- Target Date: December/2019 — Inclusion of Extrabudgetary Units and Social Security Fund statistics in General Government gross debt statistics. Responsible Institution: MoF
- Target Date: December/2019 — Seek Parliament’s approval of modification to existing legislation to include short term debt liabilities for Local Government gross debt and public corporations in Gross Debt statistics. Responsible Institution: MoF
- Target Date: December/2019 — Liaise with UNCTAD for the configuration of the debt recording system to have the possibility to record Gross Debt for General Government and Public Corporations not only as outstanding principal, but also at nominal value. Responsible Institution: MoF

### Key mission context and institutional glossary (selected)
- DMFAS — Debt Management and Financial Analysis System
- EBU — Extrabudgetary Units
- FRS — Fiscal Risk Statement
- GFSY — Government Finance Statistics Yearbook
- IMF — International Monetary Fund
- MoF — Government of the Republic of Moldova Ministry of Finance
- NBM — National Bank of Moldova
- PSDSG — Public Sector Debt Statistics Guide
- PSDSDB — Public Sector Debt Statistics Database
- PFM — Public Finance Management
- SOE — State-Owned Enterprise
- SSF — Social Security Funds
- UNCTAD — United Nations Conference for Trade and Development

### A. Institutional Coverage of General Government and Public-Sector Gross Debt — Findings
- Current MoF compilation/dissemination covers the majority of public sector institutional units as of April 11, 2018, but gaps remain.
- General government coverage (current status):
  - Coverage limited to budgetary gross debt plus long-term debt liabilities of local governments.
  - Missing components: extrabudgetary units (EBU) and social security funds (SSF).
- Extrabudgetary units (EBU):
  - Financial statements often sent to functionally relevant ministries (e.g., universities to Ministry of Education, hospitals to Ministry of Healthcare).
  - No central reporting/recording of aggregate gross debt for all EBU within MoF or NBM.
  - Authorities committed to liaising with relevant ministries to achieve centralized data collection/reporting for EBU in the short-term.
- Social Security Funds (SSF):
  - Financial statements and balance sheets for the Compulsory Medical Insurance Fund and State Social Insurance scheme are being collected within MoF and reported in GFSY, but not included in disseminated PSDS.
  - Medical Insurance Fund total assets and liabilities equal to 293 million lei at the end of 2017.
  - State Social Insurance scheme total assets and liabilities equal to about 2.0 billion lei at the end of 2017.
  - Authorities agreed to include SSF debt liabilities in disseminated PSDS.
- Local governments:
  - Institutional coverage of local government debt liabilities is complete, but limited to outstanding principal on long-term loans.
  - Note: coverage includes 32 rayons, two municipalities and one autonomous territorial unit; long term loans (from the date of contract) currently make up all local government loans.
- Public corporations:
  - Institutional coverage is relatively comprehensive for both financial corporations (NBM only) and nonfinancial corporations.
  - Instrument coverage and valuation issues remain (see sections B and C).

Recommended actions (Institutional Coverage)
- Expand collection, compilation and publication of gross debt statistics to include debt liabilities of extrabudgetary units and social security funds to align with PSDSG 2013.
- Create centralized recording of EBU and SSF gross debt; authorities consider this feasible in the short term.

### B. Instrument Coverage of General Government and Public-Sector Gross Debt — Findings
- Moldova reports PSDS on a modified cash basis, limiting instrument coverage to four PSDSG 2013 instruments: (i) debt securities; (ii) loans; (iii) SDR liabilities; and (iv) currency and deposits.
- For general government, (i), (ii) and (iii) are most important; for public corporations, (i), (ii) and (iv) are most important.
- General Government reporting:
  - Moldova has reported gross debt to GFSY and IMF/World Bank QPSDS for the past nine years.
  - Instrument coverage is relatively comprehensive for included sub-sectors (central and local government), with much of gross debt in external loans and domestically held debt securities; central government also holds SDRs.
  - Quarterly gross debt path (selected quarterly values for 2017, in billion MDL and percent of GDP):
    - 2017q1 Loans 27.121 (19.67); Debt Securities 21.793 (15.81); SDRs 3.118 (2.26); Gross Debt 52.032 (37.74)
    - 2017q2 Loans 26.524 (18.88); Debt Securities 21.527 (15.32); SDRs 2.972 (2.16); Gross Debt 51.023 (36.36)
    - 2017q3 Loans 26.789 (18.36); Debt Securities 21.912 (15.01); SDRs 2.927 (2.01); Gross Debt 51.628 (35.38)
    - 2017q4 Loans 26.611 (17.70); Debt Securities 22.579 (15.02); SDRs 2.860 (1.90); Gross Debt 52.050 (34.61)
- Public Corporations reporting:
  - Reported to QPSDS database since Q3 2009.
  - Nonfinancial public corporations: institutional units well recorded in MoF; instrument coverage limited to long-term loans.
    - Quarterly values for 2017 (in billion MDL and % GDP):
      - 2017q1 Loans 2.091 (1.52); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 2.091 (1.52)
      - 2017q2 Loans 2.059 (1.47); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 2.057 (1.47)
      - 2017q3 Loans 2.006 (1.37); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 2.004 (1.37)
      - 2017q4 Loans 1.883 (1.25); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 1.883 (1.25)
  - Financial public corporations (NBM): reported institutional coverage limited to NBM; instrument coverage limited to long-term loans with zero reported for currency and deposits.
    - Quarterly values for 2017 (in billion MDL and % GDP):
      - 2017q1 Loans 5.299 (3.84); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 5.299 (3.84)
      - 2017q2 Loans 5.123 (3.65); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 5.123 (3.65)
      - 2017q3 Loans 4.629 (3.17); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 4.629 (3.17)
      - 2017q4 Loans 4.519 (3.01); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 4.519 (3.01)
- Maturity coverage:
  - Reporting is largely limited to long-term liabilities which does not allow comprehensive evaluation of liquidity and rollover risks.
  - Reporting of short-term instruments is currently not permitted under existing legislation.

Recommended actions (Instrument Coverage)
- Include both short and long-term debt liabilities for all public-sector entities, including currency and deposits for NBM.
- Seek legislative change to permit reporting and dissemination of short-term gross debt statistics of local governments and public corporations.

### C. Valuation of Debt Instruments — Findings
- PSDSG 2013 recommends recording gross debt at both market and nominal value.
- MoF and NBM use UNCTAD’s DMFAS for recording PSDS. Under current configuration and modified cash framework, Moldova reports gross debt as outstanding principal (or ‘direct debt’), which excludes accrued interest.
- Excluding accrued interest understates gross debt where interest has accrued but not yet been paid. This issue was recognized by the December 2017 Article IV mission (IMF Country Report No. 17/398).
- Authorities were trained in computation of gross debt at nominal and market value but noted DMFAS does not allow reporting debt at nominal value for large volumes of debt contracts.
- UNCTAD indicated computation of gross debt at nominal value was being built into the new DMFAS system and a short-term solution with the IMF was being worked on.

Recommended actions (Valuation)
- Move to recording gross debt for all public-sector units and all relevant debt instruments at nominal value.
- Given debt securities do not currently trade in secondary markets, nominal recording would also enable compilation at market value.
- Inclusion of accrued interest in PSDS is important but dependent on UNCTAD availability to configure DMFAS for accrued interest recording.

### D. On-Lending and Contingent Liabilities (Guarantees) — Findings and Statistics
- Central government has reduced off-balance sheet exposure in state guarantees and on-lending balance sheet exposure recognized in the December 2017 Article IV Consultation.
- Significant central government exposure to other public and private sector debt remains, recognized in the 11/2017 Fiscal Risk Statement: “exposure to public debt” from “unexpected market developments” rated as “high probability” with “medium impact”; bailing out insolvent public corporations and commercial banks rated as “high” potential impact.
- Central government on-lending (selected data):
  - On-Lending as % of Total Debt (2014–2017) and values in billion MDL and % of Total Debt:
    - 2014 Local Government 0.46 (1.67); SOEs 1.057 (3.85); Commercial Banks 2.791 (10.16); Total On-Lending 4.309 (15.68)
    - 2015 Local Government 0.72 (2.15); SOEs 0.762 (2.27); Commercial Banks 3.208 (9.58); Total On-Lending 4.691 (14.00)
    - 2016 Local Government 0.74 (1.47); SOEs 1.035 (2.04); Commercial Banks 2.884 (5.60); Total On-Lending 4.624 (9.11)
    - 2017 Local Government 0.72 (1.39); SOEs 1.160 (2.24); Commercial Banks 2.464 (4.77); Total On-Lending 4.321 (8.36)
- Central government guarantees called (selected data):
  - CG* Guarantees % of Total Debt (2014–2017) and values in billion MDL and % of Total Debt (*unconsolidated central government):
    - 2014 Local Government 0 (0); SOEs 0 (0); Commercial Banks 6.450 (23.48); Total Guarantees called 6.450 (23.48)
    - 2015 Local Government 0 (0); SOEs 0 (0); Commercial Banks 1.3689 (40.85); Total Guarantees called 1.3689 (40.85)
    - 2016 Local Government 0 (0); SOEs 0 (0); Commercial Banks 0 (0); Total Guarantees called 0 (0)
    - 2017 Local Government 0 (0); SOEs 0 (0); Commercial Banks 0 (0); Total Guarantees called 0 (0)

Recommended actions (On-Lending and Guarantees)
- Continue careful monitoring of on-lending exposures to local government, SOEs and commercial banks and of past calls on guarantees given the magnitudes involved.
- Maintain comprehensive monitoring of contingent liabilities and integrate results into PSDS and fiscal risk analysis.

### Consolidated recommendations, implementation challenges and milestones
- Key recommendations and findings:
  - The authorities should continue to carefully compile, monitor and disseminate information relating to central government exposure to on-lending agreements with local governments, public corporations and commercial banks.
  - For contingent liabilities in the form of guarantees, the government should continue to record and monitor these while assessing their short, and medium-term likelihood of being called.
  - Implementing the recommendations will provide a more accurate, and comprehensive, measure of gross debt in the Moldovan public sector but will also lead to an increase in the size of gross debt.
- Detailed technical recommendations (sections A–D consolidated):
  - (i) Expanding the collection, compilation and dissemination of gross debt statistics to include debt liabilities of extrabudgetary units and social security funds to be consistent with PSDSG 2013.
    - Authorities agreed it would be prudent to have a centralized data collection and reporting mechanism for extrabudgetary unit, and social security fund, gross debt.
    - Authorities felt it was feasible to complete this task in the short term, by working with relevant departments in the MoF and changing the legislation accordingly.
  - (ii) Extending the reporting of debt liabilities to include those with both short and long-term maturity structures for all public-sector entities.
    - Authorities agreed that PSDS guidelines recommend inclusion of both short and long-term debt liabilities.
    - Reporting of short term instruments is not permitted under existing legislation and would need to be changed before publishing short term gross debt of local governments and public corporations.
  - (iii) Recording gross debt for all public-sector units and all relevant debt instruments at nominal value.
    - Given that debt securities do not currently trade in secondary markets, this would also provide gross debt statistics to be compiled at market value.
    - Authorities are aware of importance of including accrued interest on debt liabilities in public sector debt statistics, but noted this would require changes to prevailing legislation and accounting practices; and the availability of technical requirements in their debt management system.
- Implementation challenges and resource needs:
  - Implementing (ii) would require changing the current legal framework for debt management.
  - Implementing (iii) would require an upgrade of the DMFAS system and/or additional staff in the Moldovan debt management office.
  - Identified risks:
    - Medium risk – depends upon changes to existing laws governing dissemination of debt statistics (for extrabudgetary units and social security funds).
    - Medium risk – depends upon changes to existing laws governing dissemination of debt statistics and political support (for extending reporting to include both short and long-term debt liabilities).
    - Medium risk – depends upon the availability of technical resources from authorities’ debt management system (external factors) for recording debt at nominal value.
- Verifiable indicators:
  - Publication of extrabudgetary unit gross debt.
  - Publication of social security fund gross debt.
  - Publication of short term debt for all public-sector entities and instruments.
  - Inclusion of accrued interest in debt statistics.
- Target Completion Date for the following outcomes: December 2019
  - Expand the collection, compilation and dissemination of gross debt statistics to include debt liabilities of extrabudgetary units.
  - Expand the collection, compilation and dissemination of gross debt statistics to include debt liabilities of social security funds.
  - Extending the reporting of debt liabilities to include both short and long-term debt liabilities for all public-sector entities.
  - The recording of gross debt for all public-sector units and all relevant debt instruments at nominal value (verifiable via the inclusion of accrued interest in debt statistics).

### Technical training topics covered
- Defining and identifying Institutional Structure of the Public Sector
- Defining and identifying Debt Instrument in the Public Sector
- Valuation of Debt Liabilities
- Identification and valuation of Contingent Liabilities

### Officials met during the mission (selected)
- Ms. Elena Matveeva — HoD: Public Debt Department (MoF)
- Ms. Angela Gherman-Cernei — HoD: Reporting and Statistics Department (NBM)
- Ms. Marina Popuşoi — Head of Unit: Analysis and Risk Unit (MoF)
- Mr. Marcel Olari — Head of Division: External Debt Division (MoF)
- Mr. Alexandr Rodideal — Head of Division: On-Lending Division (MoF)
- Ms. Tatiana Şapoval — Senior Consultant: Analysis and Risk Unit (MoF)
- Ms. Olesea Frişcu — Senior Consultant: Domestic Debt Division (MoF)
- Ms. Crina Burca — Senior Consultant: External Debt Division (MoF)
- Mr. Artur Ucolov — Senior Consultant: External Debt Division (MoF)
- Mr. Alexandru Stajila — Principal Specialist: Reporting and Statistics Department (NBM)
- Ms. Veronica Chicu — Principal Specialist: Reporting and Statistics Department (NBM)
- Ms. Oxana Pui — Principal Consultant: Domestic Debt Division (MoF)
- Ms. Diana Belaia — Principal Consultant: State Treasury (MoF)
- Ms. Mariana Scortescu — Principal Consultant: State Treasury (MoF)
- Ms. Tatiana Lupanciuc — Principal Consultant: On-Lending (MoF)

*Source: cr18281 - 1. Institutional Coverage of Public Sector Gross Debt in Moldova (PDF chapter) — International Monetary Fund*

### 1. Institutional Coverage of Public Sector Gross Debt in Moldova ________________________________ 6

### 1. Institutional Coverage of Public Sector Gross Debt in Moldova

### Summary of mission outcomes and priority recommendations
- A Public-Sector Debt Statistics (PSDS) technical assistance (TA) mission was conducted in Chisinau during April 2–6, 2018, to evaluate comprehensiveness of public sector debt statistics in terms of:
  - (i) institutional coverage;
  - (ii) instrument coverage, including maturity structures;
  - (iii) valuation of debt liabilities; and
  - (iv) additional fiscal risks from contingent liabilities (on-lending and guarantees).
- The mission found Moldova continues to improve recording, compilation and dissemination of public sector debt statistics but faces five main statistical challenges:
  - (i) The collection, compilation and dissemination of gross debt statistics for extrabudgetary units (EBU).
  - (ii) The collection, compilation and dissemination of gross debt statistics for social security funds (SSF).
  - (iii) Expansion of coverage for public corporations’ gross debt statistics to include short term liabilities (currently only long term gross debt statistics are being reported for both financial and nonfinancial public corporations).
  - (iv) Expansion of coverage for local governments gross debt statistics to include short term liabilities (currently only long term gross debt statistics are being reported).
  - (v) The recording of gross debt at nominal value for all instruments. Currently Moldova is reporting gross debt as outstanding principal which does not include accrued interest.
- Adoption of these five recommendations plus comprehensive monitoring of on-lending and contingent liabilities would increase policymakers’ ability to forecast fiscal risk and monitor gross debt in line with the Fiscal Risk Statement (FRS).

Priority recommendations (action plan highlights)
- Target Date: December/2019 — Inclusion of Extrabudgetary Units and Social Security Fund statistics in General Government gross debt statistics. Responsible Institution: MoF
- Target Date: December/2019 — Seek Parliament’s approval of modification to existing legislation to include short term debt liabilities for Local Government gross debt and public corporations in Gross Debt statistics. Responsible Institution: MoF
- Target Date: December/2019 — Liaise with UNCTAD for the configuration of the debt recording system to have the possibility to record Gross Debt for General Government and Public Corporations not only as outstanding principal, but also at nominal value. Responsible Institution: MoF

### Key mission context and institutional glossary (selected)
- DMFAS — Debt Management and Financial Analysis System
- EBU — Extrabudgetary Units
- FRS — Fiscal Risk Statement
- GFSY — Government Finance Statistics Yearbook
- IMF — International Monetary Fund
- MoF — Government of the Republic of Moldova Ministry of Finance
- NBM — National Bank of Moldova
- PSDSG — Public Sector Debt Statistics Guide
- PSDSDB — Public Sector Debt Statistics Database
- PFM — Public Finance Management
- SOE — State-Owned Enterprise
- SSF — Social Security Funds
- UNCTAD — United Nations Conference for Trade and Development

---

### A. Institutional Coverage of General Government and Public-Sector Gross Debt — Findings
- Current MoF compilation/dissemination covers the majority of public sector institutional units as of April 11, 2018, but gaps remain.
- General government coverage (current status):
  - Coverage limited to budgetary gross debt plus long-term debt liabilities of local governments.
  - Missing components: extrabudgetary units (EBU) and social security funds (SSF).
- Extrabudgetary units (EBU):
  - Financial statements often sent to functionally relevant ministries (e.g., universities to Ministry of Education, hospitals to Ministry of Healthcare).
  - No central reporting/recording of aggregate gross debt for all EBU within MoF or NBM.
  - Authorities committed to liaising with relevant ministries to achieve centralized data collection/reporting for EBU in the short-term.
- Social Security Funds (SSF):
  - Financial statements and balance sheets for the Compulsory Medical Insurance Fund and State Social Insurance scheme are being collected within MoF and reported in GFSY, but not included in disseminated PSDS.
  - Medical Insurance Fund total assets and liabilities equal to 293 million lei at the end of 2017.
  - State Social Insurance scheme total assets and liabilities equal to about 2.0 billion lei at the end of 2017.
  - Authorities agreed to include SSF debt liabilities in disseminated PSDS.
- Local governments:
  - Institutional coverage of local government debt liabilities is complete, but limited to outstanding principal on long-term loans.
  - Note: coverage includes 32 rayons, two municipalities and one autonomous territorial unit; long term loans (from the date of contract) currently make up all local government loans.
- Public corporations:
  - Institutional coverage is relatively comprehensive for both financial corporations (NBM only) and nonfinancial corporations.
  - Instrument coverage and valuation issues remain (see sections B and C).

Recommended actions (Institutional Coverage)
- Expand collection, compilation and publication of gross debt statistics to include debt liabilities of extrabudgetary units and social security funds to align with PSDSG 2013.
- Create centralized recording of EBU and SSF gross debt; authorities consider this feasible in the short term.

---

### B. Instrument Coverage of General Government and Public-Sector Gross Debt — Findings
- Moldova reports PSDS on a modified cash basis, limiting instrument coverage to four PSDSG 2013 instruments: (i) debt securities; (ii) loans; (iii) SDR liabilities; and (iv) currency and deposits.
- For general government, (i), (ii) and (iii) are most important; for public corporations, (i), (ii) and (iv) are most important.
- General Government reporting:
  - Moldova has reported gross debt to GFSY and IMF/World Bank QPSDS for the past nine years.
  - Instrument coverage is relatively comprehensive for included sub-sectors (central and local government), with much of gross debt in external loans and domestically held debt securities; central government also holds SDRs.
  - Quarterly gross debt path (selected quarterly values for 2017, in billion MDL and percent of GDP):
    - 2017q1 Loans 27.121 (19.67); Debt Securities 21.793 (15.81); SDRs 3.118 (2.26); Gross Debt 52.032 (37.74)
    - 2017q2 Loans 26.524 (18.88); Debt Securities 21.527 (15.32); SDRs 2.972 (2.16); Gross Debt 51.023 (36.36)
    - 2017q3 Loans 26.789 (18.36); Debt Securities 21.912 (15.01); SDRs 2.927 (2.01); Gross Debt 51.628 (35.38)
    - 2017q4 Loans 26.611 (17.70); Debt Securities 22.579 (15.02); SDRs 2.860 (1.90); Gross Debt 52.050 (34.61)
- Public Corporations reporting:
  - Reported to QPSDS database since Q3 2009.
  - Nonfinancial public corporations: institutional units well recorded in MoF; instrument coverage limited to long-term loans.
    - Quarterly values for 2017 (in billion MDL and % GDP):
      - 2017q1 Loans 2.091 (1.52); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 2.091 (1.52)
      - 2017q2 Loans 2.059 (1.47); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 2.057 (1.47)
      - 2017q3 Loans 2.006 (1.37); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 2.004 (1.37)
      - 2017q4 Loans 1.883 (1.25); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 1.883 (1.25)
  - Financial public corporations (NBM): reported institutional coverage limited to NBM; instrument coverage limited to long-term loans with zero reported for currency and deposits.
    - Quarterly values for 2017 (in billion MDL and % GDP):
      - 2017q1 Loans 5.299 (3.84); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 5.299 (3.84)
      - 2017q2 Loans 5.123 (3.65); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 5.123 (3.65)
      - 2017q3 Loans 4.629 (3.17); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 4.629 (3.17)
      - 2017q4 Loans 4.519 (3.01); Debt Securities 0 (0); Currency and Deposits 0 (0); Gross Debt 4.519 (3.01)
- Maturity coverage:
  - Reporting is largely limited to long-term liabilities which does not allow comprehensive evaluation of liquidity and rollover risks.
  - Reporting of short-term instruments is currently not permitted under existing legislation.

Recommended actions (Instrument Coverage)
- Include both short and long-term debt liabilities for all public-sector entities, including currency and deposits for NBM.
- Seek legislative change to permit reporting and dissemination of short-term gross debt statistics of local governments and public corporations.

---

### C. Valuation of Debt Instruments — Findings
- PSDSG 2013 recommends recording gross debt at both market and nominal value.
- MoF and NBM use UNCTAD’s DMFAS for recording PSDS. Under current configuration and modified cash framework, Moldova reports gross debt as outstanding principal (or ‘direct debt’), which excludes accrued interest.
- Excluding accrued interest understates gross debt where interest has accrued but not yet been paid. This issue was recognized by the December 2017 Article IV mission (IMF Country Report No. 17/398).
- Authorities were trained in computation of gross debt at nominal and market value but noted DMFAS does not allow reporting debt at nominal value for large volumes of debt contracts.
- UNCTAD indicated computation of gross debt at nominal value was being built into the new DMFAS system and a short-term solution with the IMF was being worked on.

Recommended actions (Valuation)
- Move to recording gross debt for all public-sector units and all relevant debt instruments at nominal value.
- Given debt securities do not currently trade in secondary markets, nominal recording would also enable compilation at market value.
- Inclusion of accrued interest in PSDS is important but dependent on UNCTAD availability to configure DMFAS for accrued interest recording.

---

### D. On-Lending and Contingent Liabilities (Guarantees) — Findings and Statistics
- Central government has reduced off-balance sheet exposure in state guarantees and on-lending balance sheet exposure recognized in the December 2017 Article IV Consultation.
- Significant central government exposure to other public and private sector debt remains, recognized in the 11/2017 Fiscal Risk Statement: “exposure to public debt” from “unexpected market developments” rated as “high probability” with “medium impact”; bailing out insolvent public corporations and commercial banks rated as “high” potential impact.
- Central government on-lending (selected data):
  - On-Lending as % of Total Debt (2014–2017) and values in billion MDL and % of Total Debt:
    - 2014 Local Government 0.46 (1.67); SOEs 1.057 (3.85); Commercial Banks 2.791 (10.16); Total On-Lending 4.309 (15.68)
    - 2015 Local Government 0.72 (2.15); SOEs 0.762 (2.27); Commercial Banks 3.208 (9.58); Total On-Lending 4.691 (14.00)
    - 2016 Local Government 0.74 (1.47); SOEs 1.035 (2.04); Commercial Banks 2.884 (5.60); Total On-Lending 4.624 (9.11)
    - 2017 Local Government 0.72 (1.39); SOEs 1.160 (2.24); Commercial Banks 2.464 (4.77); Total On-Lending 4.321 (8.36)
- Central government guarantees called (selected data):
  - CG* Guarantees % of Total Debt (2014–2017) and values in billion MDL and % of Total Debt (*unconsolidated central government):
    - 2014 Local Government 0 (0); SOEs 0 (0); Commercial Banks 6.450 (23.48); Total Guarantees called 6.450 (23.48)
    - 2015 Local Government 0 (0); SOEs 0 (0); Commercial Banks 1.3689 (40.85); Total Guarantees called 1.3689 (40.85)
    - 2016 Local Government 0 (0); SOEs 0 (0); Commercial Banks 0 (0); Total Guarantees called 0 (0)
    - 2017 Local Government 0 (0); SOEs 0 (0); Commercial Banks 0 (0); Total Guarantees called 0 (0)

Recommended actions (On-Lending and Guarantees)
- Continue careful monitoring of on-lending exposures to local government, SOEs and commercial banks and of past calls on guarantees given the magnitudes involved.
- Maintain comprehensive monitoring of contingent liabilities and integrate results into PSDS and fiscal risk analysis.

*Source: cr18281 - 1. Institutional Coverage of Public Sector Gross Debt in Moldova (PDF chapter) — International Monetary Fund*

### 23. The authorities should continue to carefully, compile, monitor and disseminate

### 23. The authorities should continue to carefully, compile, monitor and disseminate

### Key recommendations and findings
- The authorities should continue to carefully compile, monitor and disseminate information relating to central government exposure to on-lending agreements with local governments, public corporations and commercial banks.
- With respect to contingent liabilities in the form of guarantees, the government should continue to record and monitor these while assessing their short, and medium-term likelihood of being called.
- The mission finds that implementing the recommendations will provide a more accurate, and comprehensive, measure of gross debt in the Moldovan public sector but will also lead to an increase in the size of gross debt.

### Detailed technical recommendations (sections A–D consolidated)
- (i) Expanding the collection, compilation and dissemination of gross debt statistics to include debt liabilities of extrabudgetary units and social security funds to be consistent with PSDSG 2013.
  - Authorities agreed it would be prudent to have a centralized data collection and reporting mechanism for extrabudgetary unit, and social security fund, gross debt.
  - Authorities felt it was feasible to complete this task in the short term, by working with relevant departments in the MoF and changing the legislation accordingly.
- (ii) Extending the reporting of debt liabilities to include those with both short and long-term maturity structures for all public-sector entities.
  - Authorities agreed that PSDS guidelines recommend inclusion of both short and long-term debt liabilities.
  - Reporting of short term instruments is not permitted under existing legislation and would need to be changed before publishing short term gross debt of local governments and public corporations.
- (iii) Recording gross debt for all public-sector units and all relevant debt instruments at nominal value.
  - Given that debt securities do not currently trade in secondary markets, this would also provide gross debt statistics to be compiled at market value.
  - Authorities are aware of importance of including accrued interest on debt liabilities in public sector debt statistics, but noted this would require changes to prevailing legislation and accounting practices; and the availability of technical requirements in their debt management system.

### Implementation challenges and resource needs
- Implementing (ii) would require changing the current legal framework for debt management.
- Implementing (iii) would require an upgrade of the DMFAS system and/or additional staff in the Moldovan debt management office.
- Identified risks include:
  - Medium risk – depends upon changes to existing laws governing dissemination of debt statistics (for extrabudgetary units and social security funds).
  - Medium risk – depends upon changes to existing laws governing dissemination of debt statistics and political support (for extending reporting to include both short and long-term debt liabilities).
  - Medium risk – depends upon the availability of technical resources from authorities’ debt management system (external factors) for recording debt at nominal value.
- Verifiable indicators:
  - Publication of extrabudgetary unit gross debt.
  - Publication of social security fund gross debt.
  - Publication of short term debt for all public-sector entities and instruments.
  - Inclusion of accrued interest in debt statistics.

### Target actions and milestones (timing)
- Target Completion Date for the following outcomes: December 2019
  - Expand the collection, compilation and dissemination of gross debt statistics to include debt liabilities of extrabudgetary units.
  - Expand the collection, compilation and dissemination of gross debt statistics to include debt liabilities of social security funds.
  - Extending the reporting of debt liabilities to include both short and long-term debt liabilities for all public-sector entities.
  - The recording of gross debt for all public-sector units and all relevant debt instruments at nominal value (verifiable via the inclusion of accrued interest in debt statistics).

### Technical training topics covered
- Defining and identifying Institutional Structure of the Public Sector
- Defining and identifying Debt Instrument in the Public Sector
- Valuation of Debt Liabilities
- Identification and valuation of Contingent Liabilities

### Officials met during the mission (selected)
- Ms. Elena Matveeva — HoD: Public Debt Department (MoF)
- Ms. Angela Gherman-Cernei — HoD: Reporting and Statistics Department (NBM)
- Ms. Marina Popuşoi — Head of Unit: Analysis and Risk Unit (MoF)
- Mr. Marcel Olari — Head of Division: External Debt Division (MoF)
- Mr. Alexandr Rodideal — Head of Division: On-Lending Division (MoF)
- Ms. Tatiana Şapoval — Senior Consultant: Analysis and Risk Unit (MoF)
- Ms. Olesea Frişcu — Senior Consultant: Domestic Debt Division (MoF)
- Ms. Crina Burca — Senior Consultant: External Debt Division (MoF)
- Mr. Artur Ucolov — Senior Consultant: External Debt Division (MoF)
- Mr. Alexandru Stajila — Principal Specialist: Reporting and Statistics Department (NBM)
- Ms. Veronica Chicu — Principal Specialist: Reporting and Statistics Department (NBM)
- Ms. Oxana Pui — Principal Consultant: Domestic Debt Division (MoF)
- Ms. Diana Belaia — Principal Consultant: State Treasury (MoF)
- Ms. Mariana Scortescu — Principal Consultant: State Treasury (MoF)
- Ms. Tatiana Lupanciuc — Principal Consultant: On-Lending (MoF)

*IMF staff mission recommendations as detailed in the source chapter.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18281.pdf_