## 1. Government Control of Corporations

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### Summary of mission outcomes and priority recommendations
- Mission: Public-Sector Debt Statistics (PSDS) technical assistance (TA) mission in Chișinău during October 2–8, 2019; funded by Data for Decisions (D4D) multi-donor trust fund; follow-up to D4D PSDS workshop in Vienna, July 2019.
- Principal objectives:
  - Follow up on sectoral coverage of debt, instrument coverage, valuation of debt instruments.
  - Review intra-public sector assets and recommend further consolidation of public debt.
  - Consider exclusion of Special Drawing Rights (SDR) allocations from headline debt.
  - Strengthen oversight of Public Private Partnerships (PPPs).
- Key findings:
  - Sectoral coverage largely includes the majority of public sector units, but boundaries between general government and public corporations may not fully align with international standards.
  - Main instrument gap: exclusion of local government and public corporation short-term (ST) debt; local government ST debt is small, public corporations ST debt may be up to around MDL1 billion at end 2018.
  - Public debt excludes significant National Bank of Moldova (NBM) short-term liabilities, including NBM Certificates (MDL 6.3billion at end 2018) and banks’ substantial currency and deposit liabilities.
  - Valuation: Moldova records debt at issue price; mission recommends recording at face value in the short term for ST instruments, pending later move to nominal value. Issue-price valuation understates debt for instruments issued at a discount.
  - Consolidation: NBM and Deposit Guarantee Fund (DGF) holdings of Government of Moldova (GOM) securities are not consolidated; headline public debt was MDL 57.9 billion at end 2018; consolidating NBM and DGF holdings reduces public debt to MDL 48.1 billion. Removing SDR allocations from headline debt would further reduce headline debt to MDL 49.1 billion at end 2018.
  - PPPs can give rise to government assets and government debt; recommended strengthening oversight and creating a comprehensive PPP database including assessment of accounting/statistical treatment before expansion.
- Priority recommendations and target dates:
  - January 2020 — Make decision to move recording of debt securities issued at a discount from issue price to face value in all debt reports. Responsible: MOF.
  - June 2020 — Seek Parliament’s approval of modification to existing legislation to include ST debt liabilities for Local Government and public corporations in Gross Debt statistics. Responsible: MOF.
  - June 2020 — Amend QPSD reporting to include NBM Certificates and consolidate NBM and DGF holdings of government debt. Responsible: MOF.

### Detailed technical assessment and recommendations
- Institutional coverage
  - Current PDD compilation covers general government (budgetary central government and local government), public nonfinancial corporations, and the NBM.
  - Extrabudgetary units (EBU): MOF surveyed the 82 largest entities; these entities reported having no debt. Not a priority to extend reporting now, but centralized data collection for EBU liabilities is prudent.
  - Social Security Funds (SSF): 2017 numbers: Medical Insurance Fund assets/liabilities MDL 293 million; State Social Insurance scheme assets/liabilities about MDL 2.0 billion. 2018 financial statements concluded there is no debt in the form of debt securities or loans for these institutions; much of the MDL 2.0 billion is capital/equity. Collection of liabilities data from these institutions is still prudent.
- Public corporations
  - Coverage of public nonfinancial corporation gross debt is relatively comprehensive in institutional terms, but instrument coverage gaps remain.
  - State-owned enterprise counts:
    - JSCs where GOM has >50 percent shareholding: 32 (28 trading, 4 in liquidation).
    - Wholly owned SOEs: more than 100.
    - Local government owned enterprises: ~500.
  - NBM is Moldova’s only public financial corporation; some NBM liabilities are included in reports but instrument coverage is incomplete. NBM holds a considerable stock of government debt following 2016 bank failures; these holdings are not currently consolidated and should be when considering public sector debt.
- Classification issues and recommendations
  - Some entities may be misclassified (example: State Road Administrator may be a public nonfinancial corporation rather than general government).
  - Reclassifications affect debt, GFS, national accounts, and monetary statistics. Recommendation: establish a joint working group including MOF, NBM, and National Bureau of Statistics (NBS) to review public sector classifications and produce a complete list of public units delineated in line with GFSM 2014.
  - Specific case: Moldovagaz — ownership: Gazprom 51 percent, GOM 35 percent, Transnistria authorities 15 percent. Gazprom classifies Moldovagaz as an “associate”; GOM retains power to appoint the Chief Executive (indicator of control under GFSM 2014). Mission recommends closer review within the working group.

### Instrument coverage, short-term debt estimates, and methods
- PSDS reporting basis and instruments:
  - Moldova reports PSDS on a modified cash basis and records debt using three instruments in PSDSG 2013: (i) debt securities; (ii) loans; and (iii) SDR liabilities.
  - Current debt definition includes both ST and LT term for central government, but only long-term debt (by original maturity) for local government and public corporations.
- Local government ST debt:
  - Law limits local governments’ ST debt to 5 percent of a municipality’s own revenues and must be paid by fiscal year end; therefore local government ST debt is near zero on annual basis.
  - Total local government ST debt in Q2 2019 was just under MDL62 million.
  - Table (estimates of LG ST Debt Q4 2018 – Q2 2019) (MDL ‘000s):
    - Total Local Government Debt (Treasury): Q4 2018 = 37,792; Q1 2019 = 72,790; Q2 2019 = 92,335
    - Total LT Debt (Public Debt Department): Q4 2018 = 36,400; Q1 2019 = 32,800; Q2 2019 = 30,600
    - Estimated ST Debt: Q4 2018 = 1,392; Q1 2019 = 39,990; Q2 2019 = 61,735
  - Recommendation (Target Date June 2020): Establish a joint working group to review sectorization and boundaries of Public Sector (Moldovagaz) and General Government. Responsible: MOF / NBM / NBS.
  - Recommendation (Target Date June 2020): Seek Parliament’s approval to include ST debt liabilities for Local Government and public corporations in Gross Debt statistics. Responsible: MOF / NBM.
- Public nonfinancial corporations — missing ST debt
  - PPA financial accounts used to estimate ST liabilities not included in public nonfinancial corporations’ debt data.
  - Total short- and long-term liabilities of JSCs and SOEs at end-2018: MDL7,787,298.00 (MDL ‘000s).
    - LT debt already included in debt statistics: MDL3,300,000.00 (implied).
    - Maximum ST debt missing (PSDSG definition including other accounts payable): MDL4.5 billion (likely an overestimate under current national definition).
    - Debt concentrated in 11 enterprises accounting for 85 percent of total liabilities.
  - Selected enterprise liabilities (MDL ‘000s, end-2018):
    - Moldtelecom: 1,312,187.00
    - TRACOM: 1,050,060.00
    - Termoelectrica: 775,445.00
    - Moldtranslectro: 630,792.00
    - Administrator de Stat a Drumurilor: 548,957.00
    - Calea Ferata Din Moldova: 528,784.00
    - Moldelectrica: 505,756.00
    - Cricova: 352,335.00
    - Energocom: 308,447.00
    - Centrala Electrica de Termoficare Nord Din Balti: 298,488.00
    - Posto Moldovei: 297,666.00
- Box 2 method for estimating missing ST debt
  - Formula: ST debt = Total short- and long-term liabilities minus other accounts payable minus LT debt reported to PDD.
  - Moldtelecom example (end-2018):
    - Total short- and long-term liabilities: MDL1312 million.
    - Other accounts payable: MDL538 million.
    - Remaining borrowings: MDL774 million.
    - PDD recorded LT debt for Moldtelecom: MDL635 (context indicates MDL635 million).
    - Resulting estimated ST debt not captured: around MDL139 million.
    - MDL139 million ≈ 20 percent of Moldtelecom’s total short- and long-term liabilities excluding LT debt captured by PDD.
    - Extrapolation: suggests around 20 percent of MDL4.5 billion liabilities not captured are short-term → estimate MDL900 million of missing ST debt (very crude).
  - Mission estimate: amount of ST debt more likely in the region of MDL1 billion, (+/-).

### NBM certificates and central bank liabilities
- Largest missing item in Moldova’s public debt: stock of NBM certificates (14-day instruments).
- NBM certificates at end-2018: MDL 6.2 billion (NBM financial statements).
- Outstanding stock of NBM Certificates 2011–18 (MDL millions): 2011 = 2,908.0; 2012 = 3,741.4; 2013 = 2,602.0; 2014 = 219.0; 2015 = 614.0; 2016 = 5,915.5; 2017 = 9,217.4; 2018 = 6,298.7
- Recommendation: include NBM certificates in public debt and report to the QPSD database; agree formal data reporting with NBM (e.g., collection of data on NBM certificates in revised public debt law). Target Date (June 2020): Include NBM Certificates in the Public debt. Responsible: MOF / NBM.
- Selected NBM liabilities at end-2018 (MDL millions):
  - National currency issued into circulation: 2018 = 23,748
  - Due to the Government of the Republic of Moldova: 2018 = 9,292
  - Due to the Banks: 2018 = 19,715
  - Certificates Issued by the National Bank of Moldova: 2018 = 6,298
  - Due to international financial institutions: 2018 = 7,876
  - Other liabilities: 2018 = 177
- Text notes: at end-2018 NBM had ~MDL 24 billion national currency in circulation and a further ~20 billion due to the banks and other liabilities.
- Recommendation (longer term): report all NBM liabilities to QPSD. Peer countries that do this include Albania, Armenia, Georgia.

### Valuation of debt instruments: issue price vs face value vs nominal
- Moldova currently uses UNCTAD DMFAS and reports gross debt at issue price.
- Issue price recording understates debt for discounted instruments (e.g., treasury bills). Difference between issue price and face value removed MDL732 million from Moldova’s headline debt at end-2016.
- Domestic Debt — Issue Price vs Face Value 2016–Q3 2019 (MDL Millions):
  - Issue price: 2016 = 21,520; 2017 = 22,579; 2018 = 23,059; Q1 2019 = 23,458; Q2 2019 = 23,430; Q3 2019 = 23,082
  - Face Value: 2016 = 22,251; 2017 = 22,929; 2018 = 23,371; Q1 2019 = 23,768; Q2 2019 = 23,720; Q3 2019 = 23,381
  - Difference: 2016 = 732; 2017 = 351; 2018 = 312; Q1 2019 = 310; Q2 2019 = 290; Q3 2019 = 299
- Recommendation (January 2020): move recording of debt from issue price to face value in all debt reports. Responsible: MOF.
- Longer-term recommendation: move to nominal value when DMFAS supports nominal reporting and when budget/treasury accounting shifts from cash to accrual (including recording accrued interest in GFS). Target Date (December 2021): Liaise with UNCTAD for configuration to record accrued interest and Gross Debt at nominal value. Responsible: MOF Public Debt, Budget and Treasury Departments/UNCTAD.

### Consolidation and impact on headline public debt
- Public Debt Data not fully consolidated; consolidation would significantly reduce public debt.
- Since 2016 General government and public sector debt has included ~MDL 15 billion of GOM debt securities held by NBM; DGF holds a smaller stock.
- NBM and DGF holdings of public sector debt 2011–18 (Assets, MDL millions): NBM holdings: 2011 = 2,246; 2012 = 2,075; 2013 = 2,079; 2014 = 2,075; 2015 = 2,119; 2016 = 15,584; 2017 = 15,522; 2018 = 15,472. DGF - Total assets: 283; 361; 421; 521 (years not explicitly aligned).
- Consolidation of DGF and NBM holdings reduces public sector debt:
  - Headline public debt at end-2018: MDL 57.9 billion.
  - Once NBM certificates are included and DGF and NBM holdings consolidated, public debt falls to MDL 48.1 billion.
  - Removing SDR allocations from headline measure would reduce headline public sector debt to MDL 49.1 billion at end 2018.
- Consolidated Public Sector Debt 2018 (MDL million) — selected figures:
  - 1. General Government: 52,342.4
  - 2. Non-Financial Public Corporations: 3,299.1
  - 3. Financial Public Corporation: 10,032.4
  - Consolidation: -17,486.8
  - Public Sector Total gross debt (consolidated): 48,187.1
  - Special Drawing Rights (SDRs): 2,798.2
  - Debt securities (consolidated): 13,364.4
  - Loans (consolidated): 32,024.5
- Note: consolidation importance increases if reporting expands to include NBM currency and deposit liabilities (NBM currency and deposit liabilities include ~MDL 9 billion of government deposits which would be consolidated).

### Box 1 — Government Control of Corporations; DGF classification; instrument coverage
- Control definition: ability to determine the general corporate policy of the corporation.
- Eight indicators of control highlighted; key indicator: control of appointment/removal of key personnel (e.g., chief executive).
- DGF classification and implications:
  - DGF not currently included in debt statistics; its classification should be reviewed.
  - DGF established in 2004; levies banks and invests proceeds in NBM and GOM debt securities.
  - DGF has no debt of its own, but its ownership of government and NBM securities should be reflected through consolidation.
  - DGF is a financial protection scheme as defined in GFSM 2014 Chapter 2; fees are compulsory and thus scheme likely classified within general government.
  - Footnote: DGF “though faces significant contingent liabilities should there be bank failures.”
- Instrument coverage summary:
  - Current debt definition includes ST and LT for central government; only LT for local government and public corporations.
  - Moldova has other public debt liabilities (especially other accounts payable) available from JSCs and SOEs accrual-based financial statements; estimates are not available from cash-based government accounting.
  - Recommendation: start disseminating annual estimates for other accounts payable for parts of Moldova public sector in short term.

### Box 2 — Method and example for estimating missing ST debt
- Formula: ST debt = Total short- and long-term liabilities minus other accounts payable minus LT debt reported to PDD.
- Moldtelecom example and extrapolation indicate a plausible missing ST debt of around MDL1 billion (+/-).

### Inclusion of SDRs, PPPs, net debt, and action plan highlights
- SDRs:
  - Headline debt currently includes GOM’s SDR allocations (Law 51/2009); mission recommends authorities consider removing SDR allocations from headline debt measure.
  - Out of 95 countries reporting to QPSD, just 7 reported SDR allocations as GG Debt. None of Moldova’s peers have SDR allocations in government debt.
  - Impact of removing SDRs: reduce headline public sector debt to MLD 49.1 billion at end 2018.
  - Recommendation and target: Review headline measures of debt for GG and consider removing SDR allocations. Target Date: June 2020. Responsible: MOF/NBM.
- PPPs:
  - Moldova has approximately 30 PPP contracts across sectors. Few are thought to involve payments from the budget, but expansion could give rise to public debt.
  - Recommendation: Strengthen oversight of PPP contracts and collect/collate more detailed data (including accounting/statistical treatment). Target Date: June 2020. Responsible: MOF / PPA.
- Net debt:
  - Recommend supplementing gross debt with net debt measures.
  - Calculated general government gross and net debt 2015–18 (MDL millions):
    - Gross debt: 2015 = 31,020; 2016 = 51,165; 2017 = 52,049; 2018 = 52,344
    - Net debt: 2015 = 22,711; 2016 = 27,990; 2017 = 27,399; 2018 = 28,949
    - Debt, net of highly liquid assets: 2015 = 27,812; 2016 = 46,385; 2017 = 45,272; 2018 = 45,940
- Action plan highlights and timelines:
  - January 2020 — decision to move recording from issue price to face value in all debt reports.
  - June 2020 — seek Parliamentary approval to include ST debt liabilities for Local Government and public corporations in Gross Debt statistics.
  - June 2020 — include NBM Certificates in Public debt; amend reporting to fully consolidate public sector asset holdings of other public sector debt.
  - June 2020 — establish joint working group to review sectorization and boundaries (Moldovagaz) and strengthen PPP oversight and data collection.
  - June 2020 — review headline measures of debt for GG and consider removing SDR allocations.
  - December 2021 — liaise with UNCTAD to configure debt recording system to record accrued interest and Gross Debt at nominal value.

*Source: 1mdaea2020005 - 1. Government Control of Corporations*

### 1. Government Control of Corporations  __________________________________________________________ 9

### Government Control of Corporations

### Summary of mission outcomes and priority recommendations
- A Public-Sector Debt Statistics (PSDS) technical assistance (TA) mission was conducted in Chișinău during October 2–8, 2019. The mission was funded by the Data for Decisions (D4D) multi-donor trust fund and followed up on a D4D PSDS workshop held in Vienna, Austria during July 2019.
- Principal objectives: follow up on sectoral coverage of debt, instrument coverage, valuation of debt instruments, review intra-public sector assets, recommend further consolidation of public debt, consider exclusion of Special Drawing Rights (SDR) allocations from headline debt, and strengthen oversight of Public Private Partnerships (PPPs).
- Key findings:
  - Sectoral coverage largely includes the majority of public sector units, but boundaries between general government and public corporations may not fully align with international standards.
  - Main instrument gap: exclusion of local government and public corporation short-term (ST) debt. Local government ST debt is small, but public corporations ST debt may be up to around MDL1 billion at end 2018.
  - Public debt excludes significant National Bank of Moldova (NBM) short-term liabilities, including NBM Certificates (MDL 6.3billion at end 2018) and banks’ substantial currency and deposit liabilities.
  - Valuation: Moldova currently records debt at issue price; mission recommends recording at face value in the short term for ST instruments, pending a later move to nominal value. Issue-price valuation understates debt for instruments issued at a discount.
  - Consolidation: NBM and Deposit Guarantee Fund (DGF) holdings of Government of Moldova (GOM) securities are not consolidated; headline public debt was MDL 57.9 billion at end 2018, and consolidating NBM and DGF holdings reduces public debt to MDL 48.1 billion. Removing SDR allocations from headline debt would further reduce headline debt to MDL 49.1 billion at end 2018.
  - PPPs can give rise to government assets and government debt; recommended strengthening oversight and creating a comprehensive PPP database including assessment of accounting/statistical treatment before expansion.
- Priority recommendations and target dates (Table 1):
  - January 2020 — Make decision to move recording of debt securities issued at a discount from issue price, to face value in all debt reports. Responsible: MOF
  - June 2020 — Seek Parliament’s approval of modification to existing legislation to include ST debt liabilities for Local Government and public corporations in Gross Debt statistics. Responsible: MOF
  - June 2020 — Amend QPSD reporting to include NBM Certificates but also consolidate NBM and DGF holdings of government debt. Responsible: MOF

### Detailed technical assessment and recommendations
- Institutional coverage
  - Current PDD compilation covers general government (budgetary central government and local government), public nonfinancial corporations, and the NBM.
  - Extrabudgetary units (EBU): MOF surveyed the 82 largest entities; these entities reported having no debt (though likely have trade credits and accounts payable). Not a priority to extend reporting now, but centralized data collection for EBU liabilities is prudent.
  - Social Security Funds (SSF): 2017 numbers from previous report indicated Medical Insurance Fund assets/liabilities MDL 293 million and State Social Insurance scheme assets/liabilities about MDL 2.0 billion. Review of 2018 financial statements concluded there is no debt in the form of debt securities or loans for these institutions; much of the MDL 2.0 billion is capital/equity. Collection of liabilities data from these institutions is still prudent.
- Public corporations
  - Coverage of public nonfinancial corporation gross debt is relatively comprehensive in institutional terms, but instrument coverage gaps remain.
  - Moldova has several hundred state owned enterprises: 32 Joint Stock Companies (JSCs) (28 trading, 4 in liquidation) where GOM has more than 50 percent shareholding; more than 100 wholly owned State-Owned Enterprises (SOEs); ~500 local government owned enterprises (some in liquidation). All are required to report debt to the Public Debt Department and are captured in debt statistics.
  - NBM is Moldova’s only public financial corporation; some NBM liabilities are included in reports but instrument coverage is incomplete. NBM holds a considerable stock of government debt following 2016 bank failures; these holdings are not currently consolidated and should be when considering public sector debt.
- Classification issues and recommendations
  - Some entities may be misclassified (e.g., State Road Administrator may be classified as a public nonfinancial corporation rather than general government).
  - Reclassifications have implications across debt, GFS, national accounts, and monetary statistics. Recommendation: establish a joint working group including MOF, NBM, and National Bureau of Statistics to review public sector classifications and produce a complete list of public units delineated in line with GFSM 2014.
  - Specific case: Moldovagaz — GOM holds a 35 percent shareholding and currently excludes Moldovagaz from debt statistics. Ownership split: Gazprom 51 percent, GOM 35 percent, Transnistria authorities 15 percent. Gazprom’s 2018 financial statements classify Moldovagaz as an “associate” (not a consolidated subsidiary), and GOM retains power to appoint the Chief Executive (an indicator of control under GFSM 2014). The mission recommends a closer review of Moldovagaz’s ownership and governance within the working group.

### Specific numeric and institutional points to preserve
- Mission dates: October 2–8, 2019; Vienna workshop: July 2019.
- Estimated public corporations ST debt: up to around MDL1 billion at end 2018.
- NBM Certificates: MDL 6.3billion at end 2018.
- Headline public debt at end 2018: MDL 57.9 billion.
- Public debt after consolidating NBM and DGF holdings: MDL 48.1 billion.
- Public debt after removing SDR allocations from headline measure: MDL 49.1 billion at end 2018.
- Medical Insurance Fund assets/liabilities: MDL 293 million at end 2017.
- State Social Insurance scheme assets/liabilities: about MDL 2.0 billion at end 2017.
- Number of JSCs where GOM has >50 percent shareholding: 32 (28 trading, 4 in liquidation).
- Number of wholly owned SOEs: more than 100.
- Approximate number of local government owned enterprises: ~500.
- Priority recommendation target dates: January 2020; June 2020.

*Source: 1mdaea2020005 - 1. Government Control of Corporations*

### Box 1. Government Control of Corporations

### Box 1. Government Control of Corporations

### Definition and indicators of control
- Control of corporations is defined as the ability to determine the general corporate policy of the corporation.
- To determine if a corporation is controlled by the government, the following eight indicators of control would be the most important and likely factors to consider.
- Control of the appointment and removal of key personnel—If control of the board or other governing body is weak, the appointment of key executives, such as the chief executive, chairperson, and finance director, may be decisive.
- Nonexecutive directors may also be relevant if they sit on key committees, such as the remuneration committee determining the pay of senior staff.
- Source cited: GFSM 2014 Box 2.2

### Deposit Guarantee Fund (DGF) classification and implications
- The current debt statistics do not include the Deposit Guarantee Fund (DGF); its classification should be reviewed.
- DGF was established in 2004 to provide protection for depositors in the case of a bank failure.
- DGF levies Moldovan banks and invests the proceeds of the levy in a range of investments including NBM and GOM debt securities.
- DGF has no debt of its own, but its ownership of government and NBM securities should be reflected in Moldova’s debt statistics through consolidation of these holdings.
- DGF is a financial protection scheme, as defined in GFSM 2014 Chapter 2.
- GFSM 2014 advises that if fees payable to government for such a protection scheme are compulsory (beneficiaries cannot opt out), then the scheme should be classified within general government; this is the case for the vast majority of deposit protection or guarantee funds and almost certainly the case for the DGF.
- Footnote: DGF “though faces significant contingent liabilities should there be bank failures.”

### Instrument coverage of general government, public sector, and central government debt
- Moldova reports PSDS on a modified cash basis and records debt using three instruments in the PSDSG 2013 framework: (i) debt securities; (ii) loans; and (iii) SDR liabilities.
- Current debt definition includes both ST and LT term for central government, but only long-term debt (by original maturity) for local government and public corporations.
- Moldova has other public debt liabilities (especially other accounts payable) available annually from JSCs and SOEs accrual-based financial statements, but estimates of other accounts payable are not available from the government’s cash-based accounting data.
- Maastricht debt across the EU is defined as general government consolidated gross debt in the form of currency and deposits, debt securities and loans, and excludes other accounts payable.
- Recommendation: start disseminating annual estimates for other accounts payable for parts of Moldova public sector in short term (not a key focus of this mission).

- Central government:
  - Instrument coverage is good: all loans and debt securities included, whether short or long term.
  - Central government holds a smaller amount of liabilities in the form of SDRs (Moldova’s SDR allocations); inclusion of SDRs in Moldova’s debt is discussed in section E.

### Local government debt coverage and short-term (ST) debt estimates
- Local government debt included in statistics but only long-term debts are captured; short-term debts are not captured.
- By law, local governments’ ST debt to manage cash flow is limited to 5 percent of a municipality’s own revenues and must be paid off by end of fiscal year; viewed on an annual basis, local government ST debt is near zero.
- Municipality of Chișinău provided information showing constrained ST borrowing.
- Local government entities report total debt to the Treasury; by comparing Treasury totals with long-term debt reported to PDD, the mission generated estimates of local government ST debt for Q4 2018 – Q2 2019.
- Total local government ST debt in Q2 2019 was just under MDL62 million.
- Recommendation (Target Date June 2020): Establish a joint working group to review sectorization and boundaries of Public Sector (Moldovagaz) and General Government. Responsible institutions: MOF / NBM / NBS.
- Recommendation (Target Date June 2020): Seek Parliament’s approval of modification to existing legislation to include ST debt liabilities for Local Government and public corporations in Gross Debt statistics. Responsible institutions: MOF / National Bank of Moldova.

- Table (estimates of LG ST Debt Q4 2018 – Q2 2019) (MDL ‘000s):
  - Total Local Government Debt (Treasury): Q4 2018 = 37,792; Q1 2019 = 72,790; Q2 2019 = 92,335
  - Total LT Debt (Public Debt Department): Q4 2018 = 36,400; Q1 2019 = 32,800; Q2 2019 = 30,600
  - Estimated ST Debt: Q4 2018 = 1,392; Q1 2019 = 39,990; Q2 2019 = 61,735

### Public nonfinancial corporations — scope and missing ST debt
- Public nonfinancial corporations’ debt covers LT debts of JSCs and SOEs, but does not include any ST debts.
- Public Property Agency (PPA) “Raport privind administrarea și deetatizarea proprietății publice de stat în anul 2018” contains financial accounts used to estimate ST liabilities not included in public nonfinancial corporations’ debt data.
- Total short and long term liabilities of JSCs and SOEs at end-2018: MDL7,787,298.00 (MDL ‘000s).
  - Of which LT debt already included in debt statistics: MDL3,300,000.00 (implied from text: MDL3.3billion).
  - Therefore, maximum ST debt missing (using PSDSG definition including other accounts payable): MDL4.5 billion (noting this is likely an overestimate under current national definition).
  - Debt concentrated in 11 enterprises accounting for 85 percent of total liabilities.

- Table (JSC and SOE Total Short and Long Term Liabilities, End 2018) (MDL ‘000s):
  - Total Short- and Long-Term Liabilities of which: 7,787,298.00
  - Moldtelecom: 1,312,187.00
  - TRACOM: 1,050,060.00
  - Termoelectrica: 775,445.00
  - Moldtranslectro: 630,792.00
  - Administrator de Stat a Drumurilor (State Road Administrator): 548,957.00
  - Calea Ferata Din Moldova: 528,784.00
  - Moldelectrica: 505,756.00
  - Cricova: 352,335.00
  - Energocom: 308,447.00
  - Centrala Electrica de Termoficare Nord Din Balti: 298,488.00
  - Posto Moldovei: 297,666.00
- Source: PPA Raport privind administrarea și deetatizarea proprietății publice de stat în anul 2018

### Box 2 — Method and example for estimating missing ST debt
- Formula: ST debt = Total short- and long-term liabilities minus other accounts payable minus LT debt reported to PDD.
- Moldtelecom example (end-2018):
  - Total short- and long-term liabilities: MDL1312 million.
  - Other accounts payable: MDL538 million.
  - Remaining borrowings (loans / bank borrowings etc.): MDL774 million.
  - PDD recorded LT debt for Moldtelecom: MDL635 billion (text contains inconsistent unit; context indicates PDD recorded LT debt of MDL635 million).
  - Resulting estimated ST debt not captured: around MDL139 million.
  - MDL139 million is around 20 percent of Moldtelecom’s total short- and long-term liabilities excluding existing LT debt captured by PDD.
  - Extrapolation: If representative, suggests around 20 percent of MDL4.5 billion liabilities not captured are short-term borrowings → estimate MDL900 million of missing ST debt (noted as a very crude estimate).
- Mission estimate: amount of ST debt more likely in the region of MDL1 billion, (+/-).

### NBM certificates and other central bank liabilities
- Largest missing item in Moldova’s public debt is the stock of NBM certificates: 14-day instruments resembling Treasury Bills issued by the NBM for monetary policy / liquidity management.
- NBM certificates at end-2018: MDL 6.2 billion (NBM financial statements).
- Outstanding stock of NBM Certificates 2011–18 (MDL millions):
  - 2011 = 2,908.0; 2012 = 3,741.4; 2013 = 2,602.0; 2014 = 219.0; 2015 = 614.0; 2016 = 5,915.5; 2017 = 9,217.4; 2018 = 6,298.7
- Recommendation: include NBM certificates in public debt and report to the QPSD database; preferable to agree formal data reporting with NBM (e.g., include collection of data on NBM certificates from the NBM in revised public debt law).
- Target Date Recommendation (June 2020): Include NBM Certificates in the Public debt. Responsible: MOF / NBM.

- NBM liabilities at end-2018 (MDL millions; selected items, 2011–2018 series provided):
  - National currency issued into circulation: 2018 = 23,748 (2011 = 12,016; 2012 = 14,554; 2013 = 19,040; 2014 = 19,217; 2015 = 17,044; 2016 = 18,990; 2017 = 21,032)
  - Due to the Government of the Republic of Moldova: 2018 = 9,292 (2011 = 1,963; 2012 = 1,895; 2013 = 1,641; 2014 = 2,398; 2015 = 3,311; 2016 = 5,712; 2017 = 8,783)
  - Due to the Banks: 2018 = 19,715
  - Certificates Issued by the National Bank of Moldova: 2018 = 6,298
  - Due to international financial institutions: 2018 = 7,876
  - Other liabilities: 2018 = 177
- Text notes: at end-2018 NBM had ~MDL 24 billion national currency in circulation and a further ~20 billion due to the banks and other liabilities.
- Recommendation (longer term): report all NBM liabilities to QPSD. Peer countries that do this include Albania, Armenia, Georgia.
- Table (QPSD – Debt of Public Financial Corporations – Q4 2018, % of GDP):
  - Total gross debt: Albania 30.68; Armenia 25.63; Georgia 23.68; Moldova 34.9
  - Special Drawing Rights: Albania 0.43; Armenia 1.01; Georgia 1.3
  - Currency and deposits: Albania 30.22; Armenia 19.76; Georgia 21.1; Moldova 29.7
  - Debt securities: Albania 0.13; Armenia 0.19; Georgia 3.3
  - Loans: Albania 0; Armenia 4.7; Georgia 1.08; Moldova 1.9
- Note: expanded public debt to include an additional ~30 percent of GDP in currency and deposits liabilities could be difficult; may be presented as a secondary debt number rather than headline debt.

### Valuation of debt instruments (issue price vs face value vs nominal)
- PSDSG 2013 recommends recording gross debt at both market and nominal value.
- Moldova currently using UNCTAD DMFAS and reporting gross debt at issue price.
- Issue price recording leads to systematic undervaluation for discounted instruments (e.g., treasury bills).
- Difference between issue price and face value removed MDL732 million from Moldova’s headline debt measure at end-2016.
- Domestic Debt — Issue Price vs Face Value 2016–Q3 2019 (MDL Millions):
  - Issue price: 2016 = 21,520; 2017 = 22,579; 2018 = 23,059; Q1 2019 = 23,458; Q2 2019 = 23,430; Q3 2019 = 23,082
  - Face Value: 2016 = 22,251; 2017 = 22,929; 2018 = 23,371; Q1 2019 = 23,768; Q2 2019 = 23,720; Q3 2019 = 23,381
  - Difference: 2016 = 732; 2017 = 351; 2018 = 312; Q1 2019 = 310; Q2 2019 = 290; Q3 2019 = 299
- Target Date Recommendation (January 2020): Make decision to move recording of debt from issue price to face value in all debt reports. Responsible: MOF.
- Mission recommendation: initially move to record debt at face value; longer-term goal to move to nominal value when DMFAS supports nominal reporting and when budget/treasury accounting shifts from cash to accrual (including recording accrued interest in GFS data).
- Target Date Recommendation (December 2021): Liaise with UNCTAD for configuration of debt recording system to record accrued (not-cash) interest and Gross Debt for General Government at nominal value. Responsible institutions: MOF Public Debt, Budget and Treasury Departments/UNCTAD.

### Consolidation and impact on headline public debt
- Public Debt Data in Moldova is currently not fully consolidated, significantly overstating public debt.
- Since 2016 General government and public sector debt has included ~MDL 15 billion of GOM debt securities held by NBM; DGF holds a smaller stock of securities.
- NBM and DGF holdings of public sector debt 2011–18 (Assets, MDL millions):
  - National Bank of Moldova holdings: 2011 = 2,246; 2012 = 2,075; 2013 = 2,079; 2014 = 2,075; 2015 = 2,119; 2016 = 15,584; 2017 = 15,522; 2018 = 15,472
  - Deposit Guarantee Fund - Total assets: 283; 361; 421; 521 (years not explicitly aligned in table)
- Consolidation of assets held by DGF and NBM (claims on other public sector entities) would reduce public sector debt.
- Headline public debt at end-2018: MDL 57.9 billion (text: “MDL 57  .9 billion”; interpreted as MDL 57.9 billion).
- Once NBM certificates are included and DGF and NBM holdings consolidated, public debt falls to MDL 48.1 billion.
- Consolidated Public Sector Debt 2018 (MDL million) — selected figures:
  - 1. General Government: 52,342.4
  - 2. Non-Financial Public Corporations: 3,299.1
  - 3. Financial Public Corporation: 10,032.4
  - Consolidation: -17,486.8
  - Public Sector Total gross debt (consolidated): 48,187.1
  - Special Drawing Rights (SDRs): 2,798.2
  - Debt securities: 23,058.6 (General Government) + 6,298.7 (Financial Public Corporation) -15,992.9 (consolidation) = 13,364.4
  - Loans: 26,485.7 (General Government) + 3,299.1 (Non-Financial Public Corporations) + 3,733.7 (Financial Public Corporation) -1,493.9 (consolidation) = 32,024.5
  - Source: PDD QPSD Submission, NBM and DGF Financial Statements, Mission calculations
- Consolidation importance increases if reporting expands to include NBM currency and deposit liabilities (NBM currency and deposit liabilities include ~MDL 9 billion of government deposits which would be consolidated).
- Table framing: Consolidated Public Sector Debt (Including Currency and Deposits) 2018 (MDL millions) continuation referenced but truncated in source.

*Source: REPUBLIC OF MOLDOVA, INTERNATIONAL MONETARY FUND (content unit: 1mdaea2020005)*

### 2. Non-

### 2. Non‑Financial Public Corporations

### Inclusion of SDRs in Debt
- Headline debt in Moldova currently includes the GOM’s liabilities in the form of SDR allocations, recorded according to Law 51/2009 because the funds in the form of Special Drawing Rights allocated by the IMF to the Republic of Moldova through the National Bank of Moldova were used to finance the state budget deficit and interest payments related to the SDR allocations are made from the state budget.
- The mission recommends the authorities consider removing SDR allocations from the headline debt measure.
- Under PSDSG 2013, SDR Allocations are a debt liability and correctly recorded in the government balance sheet or QPSD submissions, but it is very unusual for SDR allocations to be recorded as general government debt or in the general government balance sheet.
- Out of 95 countries that reported data to QPSD, just 7 reported SDR allocations as GG Debt (Australia, Canada, Greece, Latvia, Japan, UK, USA). None of Moldova’s peers have SDR allocations in government debt.
- For the three EU countries (Greece, Latvia, UK) that do record SDR allocations as general government liabilities, they do not record them in their Maastricht debt. Maastricht debt does not include SDR allocations, only debt securities, loans and currency and deposits. The UK headline national debt measures also exclude SDRs.
- SDR Allocations do not have to be repaid; the stock of SDR allocations, at least expressed in SDR terms, has stayed the same since 2009 and will remain the same in the future, changing in MDL terms only due to exchange rate movements.
- Impact of removing SDR allocations from headline debt: would reduce headline public sector debt to MLD 49.1 billion at end 2018.
- Recommendation and target:
  - Review headline measures of debt for GG, and consider removing SDRs allocations. Target Date: June 2020. Responsible Institutions: MOF/NBM.

### Public Private Partnerships (PPPs)
- Moldova has approximately 30 public private partnership (PPP) contracts, covering projects from dialysis services, housing, schools and sports centers, to public infrastructure projects (Chișinău airport and bus stations). Contracts involve public land provision, concession agreements and other forms; few are thought to involve payments from the budget itself.
- Anticipated expansion of PPPs and similar contracts (e.g., Power Purchase Agreements) could give rise to public debt under certain circumstances.
- Accounting and statistical standards guidance:
  - GFSM 2014 and EU rules emphasize risks and rewards: if enough risks and rewards are transferred to the private partner, the asset is considered private (no government debt).
  - IFRS and IPSAS emphasize control: if government controls the asset (service concession agreement), this may be government asset and give rise to debt.
- Current institutional arrangements:
  - The PPA collects information on PPP contracts, but greater MOF oversight is recommended.
  - The mission shared the UK Treasury list of PPP contracts as an example of the information to collect and the requirement to assess contracts during procurement against IFRS, UK GAAP and EU statistical rules to determine correct accounting treatment.
- Recommendation and target:
  - Strengthen oversight of PPP contracts and collect / collate more detailed data on current and planned projects (including accounting / statistical treatment). Target Date: June 2020. Responsible Institutions: MOF / PPA.

### Net Debt
- Public debt reporting is focused on gross debt; supplementing with net debt measures is recommended.
- PSDSG 2013 recognizes two concepts:
  - Net debt = gross debt minus financial assets in the equivalent categories of gross debt.
  - Debt net of highly liquid assets = gross debt minus deposits in the form of currency and deposits.
- Moldova compiles a financial balance sheet; both net debt measures are available annually and provide further insight.
- Calculated general government gross and net debt (Table 11) 2015–18 (MDL millions):
  - Gross debt: 2015 31,020; 2016 51,165; 2017 52,049; 2018 52,344
  - Net debt: 2015 22,711; 2016 27,990; 2017 27,399; 2018 28,949
  - Debt, net of highly liquid assets: 2015 27,812; 2016 46,385; 2017 45,272; 2018 45,940

### Key Public Sector Debt Components (as presented)
- Total gross debt: 52,342.4 3,299.1 66,931.4 -26,778.8 95,794.1
- Special Drawing Rights (SDRs): 2,798.2
- Currency and deposits: 56,899.0 -9,292.0 47,607.0
- Debt securities: 23,058.6 6,298.7 -15,992.9 13,364.4
- Loans: 26,485.7 3,299.1 3,733.7 -1,493.9 32,024.5

### Action Plan Highlights and Timelines
- Make decision to move recording of debt from issue price to face value in all debt reports. Target Completion Date: January 2020.
- Seek Parliament’s approval of modification to existing legislation to include ST debt liabilities for Local Government and public corporations in Gross Debt statistics. Target Completion Date: June 2020.
- Include NBM Certificates in the Public debt. Target Completion Date: June 2020.
- Amend debt reporting to fully consolidate public sector asset holdings of other public sector debt. Target Completion Date: June 2020.
- Establish a joint working group to review sectorization and boundaries of Public Sector (Moldovagaz) and General Government. Target Completion Date: June 2020.
- Strengthen oversight of PPP contracts and collect / collate more detailed data on current and planned projects (including accounting / statistical treatment). Target Completion Date: June 2020.
- Review headline measures of debt for GG, and consider removing SDR allocations. Target Completion Date: June 2020.
- Liaise with UNCTAD for the configuration of the debt recording system to have the possibility to record accrued (not-cash) interest and Gross Debt for General Government at nominal value. Target Completion Date: December 2021.

*Source: Republic of Moldova — IMF mission report excerpts (chapter 2).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1mdaea2020005.pdf_