Transnistrian president: We will either collapse or manage the meltdown

Transnistria needs to remove the current disproportion between the foreign currency supply and its demand by economic agents and residents. To settle this pressing issue, the republican parliament (Supreme Council) will probably have to reduce the exchange rate of the Transnistrian ruble.

This February, the Supreme Council has already studied the fiscal policy and approved the exchange rate band. However, the progressing economic crisis has caused certain disproportion.

As demand for foreign exchange exceeds supply significantly and the Transnistrian Republican Bank (TRB) fails to ensure supply, President of Transnistria Yevgeny Shevchuk urged operative measures and charged the competitive bodies to introduce mechanisms to stabilize the situation until the parliament decides to change the rate. An ad hoc committee was set up to hold currency auctions.

“The problem is that we will either be falling and collapse, conditionally, experiencing heavy economic consequences, or start managing the meltdown,” Shevchuk said.

The president said that the government policy had ensured a stable national currency rate within four years.

The current currency deficit makes the local banks increase the demand for foreign exchange to accumulate foreign currency reserves. At the exchange points in Transnistria, it is actually impossible to buy foreign currency.

The president explained that in 2015-2016 all the banks bought some two-three percent of the currency, except the major currency buyer, and ensure their customers with their own foreign currency. Now, the situation is more complicate and they have to apply to the Central Bank for currency.

In case, the Transnistrian ruble depreciates and sparks inflation, the government will have to increase pensions and salaries and develop compensation mechanisms in conformity with the country’s legislation. However, the population support measures will depend on the government’s resources.

At present, Transnistria is experiencing a dramatic growth of the budget deficit.

EADaily reported earlier that the Transnistrian economy has faced a crisis, as there is currency unrest on the domestic market.  Financial experts link the problem with the falling export cost of the electric power supplied by the Moldovan regional power station.

The electricity price fell by 28%, causing 65-70 million dollars loss.  Experts say Transnistria will not be able to ensure as much export as before, as the national currency of Transnistria is not recognized by any country.