Moldova
- Total external debt: $2 billion (World Bank 2005)
- Total external debt payments: $250 million (World Bank 2005).
- Population: 4.2 million (World Bank 2005)
- Percentage of adults who can read and write: 99.1% (HDR 2005)
- Average life expectancy: 68.4 years (HDR 2005)
- HIV prevalence: 1.1% (HDR 05)
- Total health spending: 4.2% of GDP (HDR 2005)
- Total spending on debt service payments: 8.62% of GDP
- Annual GDP: $2.9 billion (HDR 2005)
DROP THE DEBT FAST
Moldova is the focus of the Drop the Debt Fast on Saturday 19 April.
Recent Political History
Before World War II, most of the territory of Moldova belonged to the Romanian province of Bessarabia. In 1940, it was annexed by the Soviet Union and renamed the Moldovan Soviet Socialist Republic.
The MSSR was governed centrally by the Communist Party in Moscow and any political dissent, nationalist sentiment or any other manifestation of opposition to the one-party State was fiercely oppressed.
As the control exerted by the Soviet Union lessened under Gorbachev in the 1980s, nationalist feeling began to emerge in Moldova. In 1991, the country gained independence, however conflict erupted in Trans-Dniester between ethnic Romanians and the Russian-Ukrainian majority, as the Trans-Dniester separatists fought for independence from Moldova. Over 1,500 people died in this conflict and unrest continues today in this region.
In 1998, Moldova suffered greatly from the financial crisis in Russia, on whom they were reliant for 60% of foreign trade. This economic crisis caused many Moldavians to leave the country.
Recent political developments have seen the election and re-election of Vladimir Voronin, of the Communist Party, which caused unrest among Ethnic Romanian communities because of the party’s close ties to Russia. However, the government is seen to be developing a more Western stance, especially since 2005.
Where has the debt come from?
Moldova’s debt built up after becoming an independent state. The internal conflict caused political attention and economic resources to be diverted from developmental goals. Also after independence Moldova had to start to pay for its energy consumption, having few natural resources, particularly energy, within the country. The financial crisis in Russia in 1998 caused domestic financial markets to plunge and reduced domestic budget financing. Foreign investors withdrew their capital from the Moldovan market, forcing Moldova to accumulate further external loans.
Debt cancellation status
Moldova is officially classed as a low-income country by the World Bank. It is considered to have a 'sustainable' debt: this is measured by the size of external debt in comparison to the value of exports, without taking into account domestic debt or what Moldova needs to spend on tackling poverty. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. It has also qualified for additional debt assistance from the UK’s Multilateral Debt Relief Initiative.
The New Economics Foundation (2007) calculates that Moldova needs 100% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
Further information:
World Bank
Last updated: April 2008
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