Moldova & IMF IMF Activities Publications Press Releases


Moldovan officials on the verge of disappearing

Soon our officials will have to be mentioned in the "Red Book". "Crisis", "expenditure optimization", "budget cuts", "staff reductions" have become the most popular phrases heard in the corridors of Moldova's power structures and a bad dream for thousands of public servants. The Motherland will start making savings on their account!

However, how much are the officials getting paid for, what is so attractive in the state service, how much they cost to the state, and how the state is going to "get rid of them"?

IMF Resident Representative in Moldova Tokhir Mirzoev said in an interview to Business Class journalist:

"When compared to employment trends in other ECA countries, public sector employment in Moldova is substantially higher than in most of Eastern Europe, although it is generally in line with CIS countries. One feature of the public sector in Moldova is that it employs a large number of staff with relatively low compensation (e.g. the education sector employs about 4 percent of the population, but its average wage is about a half of the average wage in the private sector). With budget resources limited, a key choice facing the government is to either keep the current number of staff with uncompetitive wages or to advance civil service reforms allowing to reduce the number of staff and increase the wage level.

But a more important question is whether Moldova’s public sector is efficient in providing public goods and services that are i) affordable given the country’s available resources; and ii) adequate, reflecting the country’s priority needs.

Given the economic downturn, Moldova is struggling with the outcome of excessive public spending growth during the past several years. The downturn has quickly drained the government’s financial resources, because in “good times”, the public sector has not saved enough for a “rainy day”. To ensure sustainability of public finances, growth of public spending would need to be contained going forward.

The composition of Moldova’s public spending also warrants policy changes. In particular, public sector wage hikes of the recent past have been well in excess of the economy’s productivity gains. For example, last year real wages in the Moldova’s government sector increased by 20 percent compared to only 5 percent increase afforded in the non-government sector. As a result, in 2009, the country’s public sector wage bill is estimated to have consumed over a quarter of the total government expenditure and over 12 percent of the country’s GDP—among the highest in the region.

But to achieve Moldova’s goals of promoting economic growth and poverty reduction, public expenditure needs to be oriented toward more social and investment spending, and less consumption. It would also be important to implement efficiency-enhancing reforms in education and health care, and set adequate tariffs in the energy and heating sectors to cover costs of production while improving targeting of social assistance to mitigate the impact on the most vulnerable households."


Published in "Business Class" Magazine, No.2(41), February 2010