Expert-Grup

Study: Municipal bonds in the Republic of Moldova - results 3 years after the first issuances

EnergieTuesday, 16 July 20243911 views
Project:
Local Government Bonds – as a measure to foster the local autonomy

Authors

Adrian Lupușor

Adrian Lupușor

Membru, Director executiv Expert-Grup

Dumitru Pîntea

Dumitru Pîntea

Expert asociat

Ecaterina Rusu

Ecaterina Rusu

Directoare program "Politici comerciale și Zona de Liber Schimb"

Serghei Merjan

Serghei Merjan

Director program "Sectorul public: economie, management și finanțe"

In the period 2021-2022, the Independent Think-Tank "Expert-Grup", with the support of the Embassy of the Kingdom of the Netherlands in the Republic of Moldova, facilitated the first 3 municipal bond issues in the history of the country. Thus, the municipalities of mun. Chisinau, mun. Ceadir-Lunga and Singera have successfully issued municipal bonds to finance infrastructure projects of major local importance: the purchase of trolleybuses in Chisinau, the repair of road segments in Ceadir-Lunga and the construction of a water pipeline in Singera. Thus, not only the testing/piloting of a new financial instrument for the Republic of Moldova - municipal bonds - was accomplished, but also its successful implementation with a positive and tangible impact for the inhabitants of the targeted localities.

The selection of the 3 localities was based on a competitive and transparent process, with a call for expression of interest from all local public authorities (LPAs) in the country, followed by training on municipal bond issuance and an individual assessment of the capacity to successfully issue bonds. At the same time, in order to help the LPAs to use this instrument as well as to contribute to the streamlining of the national legislation on the issuance of municipal bonds, the Independent Think-Tank "Expert-Grup" has conducted the study "Municipal bonds - a tool for the development of local communities" , within the project "Local government bonds - as a measure to increase local autonomy", implemented with the support of the Embassy of the Kingdom of the Netherlands in the Republic of Moldova.

With a view to the successful issuance of municipal bonds by the 3 LPAs, Expert-Grup provided technical support at all stages of the process: Identifying the project to be financed, explaining the mechanism of the municipal bonds to mayors and municipal/local councilors, selecting the financial intermediary and negotiating the intermediation contracts, drafting the prospectus (detailed description of the project and details of the issues), promoting the prospectus to potential investors, obtaining the approval of the Ministry of Finance, and improving the regulations of the National Commission for the Financial Market (NCFM) on the procedures for issuing municipal bonds.

In the end, the issuance of municipal bonds was fully subscribed - local public authorities managed to accumulate the planned amounts from investors, which was an absolute success in the implementation of the first municipal bond issuance in the country.

The purpose of this study is to assess, 3 years after the first municipal bond issuance, the impact and lessons learnt by each of the 3 municipalities, from the perspective of issuance costs as well as budgetary and economic impact.