The 'theft of the billion'

In November 2014 Moldova's banking system suffered a fraud in which about 1 billion US dollars, roughly an eighth of GDP, left three banks, Banca de Economii, Banca Socială and Unibank, through circular loans to shell companies. The National Bank of Moldova placed the banks under special supervision and then provided emergency liquidity to prevent a run, with the government guaranteeing these loans, which added substantially to public debt. The leu fell by around a third against the dollar in 2015, inflation rose above 9 percent, and output stalled as foreign donors suspended budget support and the central bank raised interest rates sharply. The episode led to reforms in bank supervision and ownership transparency, and it explains the break in Moldova's growth, exchange-rate and debt charts in 2015.