Gearing Public Finance to Growth, Employment and Poverty Reduction in Moldova

Abstract

This Country Study w as part of a comprehensive UNDP-supported national report on Economic Policies for Growth, Employment and Poverty Reduction in Moldova. This study focuses on analysing Moldova’s public finances, including mobilizing more domestic revenue, reducing its external and domestic debt and re-allocating its public expenditures. It counsels against lowering rates on direct taxes, which it predicts will be not only inequitable but also ineffectual; instead,it offers alternative recommendations on how to raise more revenue and make the tax system more progressive. While commending the government of Moldova for being able to unilaterally reduce its external debt burden, it sharply criticizes international donors for not having provided the country with concessional lending during the difficult transition years ofthe 1990s. Had the country’s income per person been correctly calculated, it would have qualified for such lending and not been saddled with such an onerous debt burden. Lastly, the study recommends that the government devote more resources to economic services, and public investment in general, in order to stimulate a more rapid rate of growth and employment generation and focus more economic resources on poor households. (...)