The Executive Board of the International Monetary Fund (IMF) approved Moldova’s requests for an economic reform program under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements. The approval of these requests enables the disbursement about US$79.8 million (SDR 57.2 million). Total envisaged disbursements under Moldova’s 40-month ECF/EFF arrangements would amount to about US$558.3 million (SDR 400.0 million), IPN reports, quoting a press release of the IMF.
Following the Executive Board discussion, Kenji Okamura, Deputy Managing Director and Acting Chair, said the Moldovan authorities have made commendable progress in rehabilitating the banking sector and bolstering macro-financial stability. However, the COVID-19 pandemic, drought in 2020, and the ongoing surge in global energy prices, have slowed economic activity, intensified downside risks, and complicated policy making. The IMF-supported program aims to sustain the post-pandemic recovery, to address pressing developmental needs, and to strengthen Moldova’s governance and institutional frameworks.
“The authorities responded quickly to address the negative macro-economic impact of the combined shocks, focusing on urgently needed policies in support of the healthcare system, social assistance programs, and business activity. However, the under-execution of approved COVID-related crisis measures emphasizes the need to address longstanding capacity constraints. A strong policy mix, including a near-term fiscal stance that carefully balances targeted social assistance and development spending, is needed to sustain the recovery.
“Recent reforms implemented by the National Bank of Moldova (NBM) and supported by the IMF have proven vital for preserving macro-financial stability during the crisis. Looking ahead, the authorities should continue their efforts to improve the national bank’s policy credibility and effectiveness; bolster financial sector supervision, financial crisis management, and macroprudential frameworks; and strengthen the national bank’s governance, transparency, and accountability. Safeguarding the NBM’s independence remains a critical precondition for its effectiveness and credibility,” said the IMF official.
He noted that on the fiscal front, improving domestic revenue mobilization, increasing public spending efficiency, decisively addressing fiscal risks emanating from state-owned enterprises, and continuing efforts to improve budget quality and transparency are vital to improve fiscal outcomes and nurture more responsive and impactful fiscal policy. Continued engagement with developmental partners to leverage their expertise and secure needed concessional financing is needed.
The proposed measures—if appropriately sequenced and resolutely implemented—are expected to yield large medium-term gains, unlocking Moldova’s untapped economic potential and accelerating its income convergence with European peers.
The Executive Board also concluded the 2021 Article IV Consultation with Moldova.
