Court of Accounts
Republic of Moldova
On May 28th 2018, the Court of Accounts examined the Financial Audit Report of the Government Report on State Budget Execution for 2017 and the Audit Report on Performance of Public Debt Management for 2017.
The purpose of the financial audit was to obtain reasonable assurance that the Government's State Budget Implementation Report for 2017, prepared by the Ministry of Finance and submitted to the Government for approval, in all material aspects, is prepared in accordance with the legal provisions and presents the information based on treasury records and on consolidated budgetary authority/institutions reports, and transactions are fair and legal.
The Ministry of Finance is the authorized central public authority with the mission of public finance management with respective competencies and responsibilities. According to the legal provisions, the Ministry of Finance prepares and submits to the Government, for examination and approval, the Annual Report on the execution of the state budget for the completed budget year and the Government presents it for approval to the Parliament by 01.06.2018.
For 2017, in the state budget there were stated revenues amounted to 33.7 billion MDL, being executed 33.9 billion MDL.
The budgetary exercise registered an execution level of 100.5% for revenues and of 93.9% for expenditures compared to stipulated provisions. The budget deficit was executed at 38.1%.
Compared to 2016, there is a tendency for increase the state budget revenues with about 4.1 billion MDL and the expenditures with about 3.1 billion MDL. At the same time, a decrease of the budget deficit with 1.9 billion MDL was recorded, which at the end of 2017 amounted to 1.5 billion MDL.
The data from the State Budget Execution Report denote that, as of December 31st, 2017, the arrears of taxpayers' liabilities payments to the state budget amounted to 1,852.7 million MDL, of which 955.7 million MDL for basic payments, 448.0 million MDL for fines and 449.0 million MDL for late payments. Compared to December 31st, 2016, the arrears to the state budget increased with 28.6%. In the structure of arrears to the state budget, the most significant part are the payments of the fiscal obligations administered by the State Tax Service - 79.2%, and the arrears to the payment of the customs liabilities represent 20.8% of the total arrears.
The State Budget Law for 2017 for refunding VAT provided for 2.6 billion MDL. Audit checks reveal that over the last 3 years there has been a steady increase trend in the volume of VAT refunded from the state budget. Thus, VAT refunds amounted to 2.6 billion MDL, being 0.1 million MDL less than the established indicator.
According to the State Budget Execution Report for 2017, household expenses were executed at the level of 93.9% and constituted 35.5 billion MDL. Thus, there was an increase of 3.1 billion MDL compared to the house expenses executed in 2016.
The audit shows that the level of execution of the household expenses generated the presence of a balance of unused allowances in 2017 in the total amount of 2.3 billion MDL. The incomplete utilization of allowances was determined by the level of expenses limits planning and the circumstances caused by non-payment of external grants at the planned level, as well as by the capacity of the budgetary authorities/institutions to use the approved allowances.
Expenditure analysis, in terms of functional classification, shows that the limits of allocations specified per year for expenditure execution have not been fully used on none of the main expenditure groups. Thus, the lowest level of executed expenditures specified per year is attested by the budgetary positions related to:
• "Household and communal household" -80.1%,
• "Services in the field of economy" - 83.5%,
• "Environmental protection" - 87.1% and
• "General Government Services" - 91.4%.
As an issue for the state budget remains the increase of the account receivables and debts of the budgetary authorities and institutions. Thus, on December 31st, 2017, they amounted to 981.5 million MDL and 743.1 million MDL, respectively. The audit shows that, compared to the previous year, both receivables and expenditure debts reported by budgetary authorities and institutions recorded increases of 2.8% and 17.9%, respectively.
The overall objective of the audit mission was to assess the manner of public debt management in terms of its portfolio structure.
As of 31.12.2017, the public debt amounted to 58451.7 million MDL, decreasing compared to 2016 with 851.4 million MDL. In the structure of the public debt, the major share is represented by the state debt (88.4%), followed by the NBM debt (7.7%), the debt of the territorial administrative units (0.7%) and the debt of the public enterprises - 3.2%.
The balance of the public external debt amounted to 34179.2 million MDL, equivalent to 1998.8 million USD, and the domestic debt balance – to 24272.5 million MDL. Thus, as compared to 2016, the balance of the public external debt, expressed in USD has grown, and in national currency has fallen. This decrease occurred as a result of the appreciation of the national currency against the USD.
Compared to the previous year, the share of public debt in GDP as of 31.12.2017 decreased with 4.9 p.p., representing 38.9%.
Audit checks on the compliance of the public debt balances reported at the end of 2016 with those reported at the beginning of 2017 found the change in domestic debt at the beginning of 2017 with 68.8 million MDL less than the balance reported by the Ministry of Finance at the end of the year 2016.
The adjustment of the public debt balance for loans contracted by public enterprises and territorial administrative units is conditioned by non-compliance with the provisions of the regulatory framework of the parties involved in the public debt reporting process. This situation is caused by failure to present, late submission or misrepresentation of the information. As a result, this has influenced the fullness and actual presentation of the public debt situation.
The state debt balance at the end of 2017 amounted to 51660.3 million MDL, of which the external state debt – 29081.8 million MDL (1,700.7 million USD), and the domestic state debt – 22578.5 million MDL. As a share in GDP, the state debt constituted about 34.4% at the end of 2017. Sustainability indicators of state debt were within the set limits.
In the total domestic state debt, the state securities issued in the primary market constituted 7223.9 million MDL (32.0%), convertible state securities - 2063.4 million MDL (9.1%), and state securities issued for state guaranties payment - 13,291.2 million MDL (58.9%). Compared to the previous year, the domestic state debt increased with 1058.9 million MDL (+ 4.9%), due to the increase of state securities issued in the primary market with 1108.9 million MDL but falling within the limit approved by the State Budget Law of 2017.
The balance of external debt at the end of 2017 amounted to 1,700.7 million USD, or with 236.0 million USD (+ 16.1%) more than the balance recorded at the end of 2016 (1464.7 million USD). This increase is driven by positive net external financing worth of 123.9 million USD and the positive fluctuation of the exchange rate of foreign currencies related to USD, which led to a 112.1 million USD increase in the foreign debt balance.
In 2017, disbursements of external loans amounted to 195.6 million USD, recording a decrease of 34.7 million USD, or being 15.1% less than the previous year (230.3 million USD).
The total expenditures for state debt, compared to the previous year, increased with 118.3 million MDL, representing 20.4 billion MDL. Of the total payments for state debt, 18.4 billion MDL were directed for the payment of the main amount, and for interest rate payment - 1.9 billion MDL. Thus, for domestic state debt, 18666.0 million MDL were used, and for the external state debt - 91.1 million USD (equivalent to 1687.6 million MDL).
As a result of audit activities, there is a need stated to strengthen the process of public sector debt management, particularly of the state debt through developing management of supervision and monitoring the debt portfolio, sustainability and vulnerability risks, in order to avoid additional financial risks for the state budget.
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