Transition: retrospectives and perspectives
Chapter I. Socio-Economic Policies
The Energy Sector
Leonid Medvedev
The economic security of the Republic of Moldova is largely dependent upon its energy complex. Moldova's own power and fuel resources are as low as 20 percent of its energy balance incomes. Power and fuel resources account for 41 to 58 percent of Moldova's yearly overall imports. The high costs incurred on these imports have resulted in higher prices on Moldovan goods and their lower competitive potential. By mid-1990s Moldova's energy debt was at 20 percent of its overall external debt. Under these circumstances, it is necessary to reduce prices on power and fuel, bring down consumption, and set up a secure system of public power provision.
The current critical state of Moldova's energy sector is the result of the painful adjustment of the Moldovan economy, some of its industrial branches in particular, to the new, market economy conditions. This has resulted into a dramatic drop in the efficiency of power enterprises, an increase in fuel consumption, a drop in power imports and as much as 20 to 30 percent of existing production capacities being actually used.
Economically, Moldova's power and fuel sector is characterized by an increase in consumption and production costs, growing expenditure on power resources, the shortage of funds to modernize industrial enterprises and to purchase power saving equipment. These trends have had a number of negative consequences, such as an increase in prices on goods and services, a decrease in the competitive potential of Moldovan goods on the internal and external markets, huge losses suffered by around half of economic agents and consequent losses to the state budget.
In order to stabilize the economic situation of Moldova's energy sector it is necessary to gradually recover the structure of its energy balance, upgrade the quality of production, and rationalize energy consumption in order to cut down energy costs.
The economic relaunch seen in 2000-2002 needs to be sustained by a commensurate recovery of the energy sector. Moldova's energy dependence is tremendous, which makes it even more urgent for a number of legislative, economic and administrative measures to be taken with a view to resuscitate the energy sector.
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