The European Commission on January 13 granted a request by the Republic of Moldova by proposing a Macro-Financial Assistance (MFA) program of up to €100 million, IPN reports. The proposed assistance would help the country meet its short-term financing needs. Macro-Financial Assistance is an exceptional EU crisis response instrument available to the EU’s neighboring partner countries
According to a press release of the European Commission, up to €40 million of the MFA would be provided in grants and up to €60 million in medium-term loans at favorable financing conditions. MFA loans are financed through EU borrowing on capital markets. The funds are then on-lent with similar financial terms to the beneficiary countries. MFA grants come from the EU budget.
Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said the assistance will help Moldova meet its most immediate financing needs and stabilise its economy. “At the same time, we are confident that the conditions related to this financing will contribute to improving economic governance in the country and encourage vital reforms,” he stated.
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said Moldova’s recent efforts to pursue stability-oriented policies and tackle long-standing vulnerabilities must be sustained. “The Commission is providing further support for the country as it works to preserve macroeconomic stability, improve governance and achieve more sustainable and inclusive growth,” said the Commissioner.
The press release says the Republic of Moldova faces many challenges, notably the need to tackle corruption and poor governance, which have contributed to a weakening of the fiscal and balance of payments positions and a slowdown in economic growth, and to thoroughly investigate the massive banking fraud that hit the country's economy in 2014. Economic difficulties have been exacerbated by weak economic activity in some of Moldova's key regional trading partners. This effect has been partly offset by increased trade with the EU, which can be linked to the Association Agreement that entered into force on 1 July 2016 and created a Deep and Comprehensive Free Trade Area.
The proposed EU MFA requires adoption by the European Parliament and the Council before it can come into effect and disbursements can be made. The new assistance would be disbursed in three installments in 2017 and 2018.
A previous MFA to the Republic of Moldova, amounting to €90 million, all in grants, was successfully implemented in 2010-2012.
