The recent government decision on measures aimed at regulating the purchase and export of cereals stipulates that the export of cereals is authorized on the basis of the contracts registered at the Universal Commodity Exchange auctions and a series of decisions addressed to the institutions empowered to complete the state material reserves.
Nobody can doubt the need to buy food wheat for the state reserve, particularly given the cereal crisis faced by Moldova last year. However, the late measures aimed at completing the state reserve and the export restrictions raise some suspicions.
The mandatory registration of the foreign commercial contracts with the Universal Commodity Exchange can be viewed as an excessive and unjustified measure aimed at controlling cereals exports. In fact, this is not an innovation for business circles. It is a tradition which ignores the legislative acts in effect and doubts the sincerity of the recent statements by the Moldovan officials about their intention to improve the business climate and promote exports.
In our opinion, these regulations are a state involvement on the cereals market with a clear and well determined goal: to diminish prices for cereals and to control prices on the domestic market. For this purpose, the authorities are resorting to a practice which is inadmissible in countries with market economy traditions, but which is traditional in our country -“ to impose economically-unjustified and unforeseeable restrictions for the business climate. We refer to the change of the playing rules simultaneously with the end of the harvesting campaign and the start of the export campaign.
The consequences of the above decision could be contrary to the government expectations if we take into consideration the recent increase in cereal prices, including in Ukraine. The Ukrainian authorities have resorted to similar and even tougher restrictions in order to cut exports and stabilize the cereal prices on the domestic market.
The consequences of such a decision are foreseeable. The agricultural producers and cereal exporters will be hit the worst. The state will also lose because its image will be tarnished, the business climate will worsen and relations with the IMF will chill.
Author: Viorel Chivriga, expert of the Coalition for Rural Economic Development (CDER)