In a special report published on Thursday 1 September, the European Court of Auditors (ECA) states that EU aid to the Republic of Moldova has only partially helped to strengthen public administration in the country.
ECA said that external factors explain several of the shortcomings revealed, whilst other weaknesses resulted from the design and implementation of the programmes and projects audited.
ECA examined whether EU aid had contributed efficiently to strengthening public administration in the country. Four budgetary support programmes were meticulously examined in the justice, public finance, public health and water sectors. Twenty projects carried out by different public authorities were also analysed.
The Republic of Moldova is the poorest country in Europe. Since 2007, it has been allocated aid amounting to €782 million through the European neighbourhood instruments. This represents annually nearly €37 per inhabitant — the highest amount in all of the EU’s eastern neighbours. In 2014 Moldova and the EU signed an association agreement including provision for a deep and comprehensive free trade area.
"Among Moldova’s main problems are widespread corruption and the weakness of its public institutions, which have been an important element of EU assistance since 2007", ECA states. A significant share of the aid comes in the form of budget support. This involves the transfer of funds to the partner country’s national treasury on condition that certain requirements are satisfied. The remaining aid is channelled through projects.
ECA believes the Commission should have been more reactive. The auditors considered that since "little progress” had been made in the sectors targeted, "we concluded that budget support had a limited effect in strengthening the public administration". ECA argues that: - the Commission could have "responded more quickly" when risks associated with the support materialised; - "the potential benefit of the programmes was reduced" by the fact that the Commission did not make full use of its ability to set preconditions for disbursement; - the Commission could have been more stringent when assessing whether the preconditions had been fulfilled.
ECA affirmed that the payment of additional funds as part of an incentive-based approach had not been justified. In total, Moldova received €93 million in this way for the years 2012 to 2014, including €28 million and €35 million through the eastern partnership integration and cooperation programme in 2012 and 2013 respectively, and €30 million under the European Neighbourhood Instrument (ENI) umbrella programme in 2014. The report states that "the rationale for awarding additional funds to Moldova was not clear”.
ECA also highlighted the fact that Moldovan civil servants received training in budgetary support as late as March 2014.
ECA recommends that the Commission apply existing measures more stringently as part of the early warning system, to prevent or mitigate risk. It also calls for the budgetary support programmes to coincide better with the national strategies (phased in assistance, ensuring that there is a well-defined national timetable for reforms).
Commission response. The Commission points out that the progress made, although partial, was accomplished in two of the four sectors benefiting from budgetary aid and subject to the audit (namely the water and health sectors). In the two other sectors (justice and public finance policy reforms), the more recent programmes are still ongoing and it is therefore still not possible to measure their final results, the Commission said. It considers, on the other hand, that it has indeed been responsive to the risks in hand. In this connection, shortly after the banking scandal broke out in November 2014, the Commission budgetary support steering committee decided in December of that year to re-examine the aid modalities in the context of the 2015 programming and to include other risk mitigation measures. In July 2015, the Commission announced the suspension of the disbursement of budgetary support funds, whilst waiting for the conclusion of an agreement between the IMF and Moldova.
Finally, the Commission says that the US$1 billion lost by the three Moldovan banks consists of depositor money that is mainly Moldovan - and not, as far as the Commission is aware, money from EU taxpayers. (Original version in French by Lionel Changeur)