Sovereign external debt management in the Republic of Moldova - challenges and sollutions

Abstract

One of the major international problems continues to be considered the sovereign external debt. A lot of countries use external loans when domestic savings are insufficient to finance consumption and national investment. Each state, as a debtor, is required to manage correctly and maintain the sustainability of the sovereign external debt. Excessive and inappropriate external indebtedness will generate sovereign risk, which negatively affects future economic policy. In addition, fiscal, monetary, currency and trade policies directly influence the volume of contracted loans. In order to successfully avoid the difficulties created by external debt, policies must be chosen so that key economic variables, such as interest rate, exchange rate of the national currency, international reserves to express real costs for decision-making authorities, and governments to accompany their public investment programs with efficient measures to capture budget resources and mobilize domestic and attracted savings. The scope of this work paper is to determine the sustainability of the sovereign external debt of the Republic of Moldova, the efficiency of its management and the impact on the national and world economy.