The International Monetary Fund (FMI) mission and the authorities of the Republic of Moldova have reached a staff-level agreement on the policies required to complete the sixth review under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) programs, as well as the second review under the Resilience and Sustainability Facility (RSF), reports IPN.
Alina Iancu, head of the FMI mission, stated that this agreement is expected to be approved by FMI management and the Executive Board. Completion of this review will allow Moldova to access 111.4 million Special Drawing Rights (approximately $148.3 million). Consequently, total disbursements under the current programs will amount to approximately $810 million.
According to the FMI's statement, Moldova’s economy, impacted by the war in Ukraine and associated shocks in energy prices, is recovering.
“We forecast economic growth of 2.6% in 2024 and 3% in 2025, primarily driven by strong domestic demand. As of October 2023, inflation has generally fallen within the National Bank of Moldova’s target range of 5% ± 1.5%. However, downside risks remain high, mainly due to the war in Ukraine and potential new shocks in the energy sector. At the same time, there are positive growth factors, such as faster progress in structural reforms, including within the EU Growth Plan, and consistent progress towards EU accession”, said Alina Iancu.
The downward revision of the budget deficit for 2024 and 2025, to 4.4% and 4.0% of GDP, respectively, reflects higher-than-expected revenues driven by strong wage and import growth. Meanwhile, public spending has remained largely unchanged, with a welcome rebalancing towards investments planned for next year.
Alina Iancu highlighted good progress on quantitative indicators, alongside uneven progress on structural reforms. “The authorities have met conditions related to financial inclusion, the insurance sector, and state enterprises. Additionally, legislative amendments to strengthen the autonomy and governance of the National Bank of Moldova are expected to be presented to Parliament soon. Agreed actions to establish the Anti-Corruption Court and adequately staff the Anti-Corruption Prosecutor’s Office are ongoing”, she said.
Furthermore, the transition from subsidizing energy bills to well-targeted cash transfers was completed on time before the heating season began. Other reform measures under the RSF program are in progress but will require more time for completion.
The FMI Executive Board meeting to discuss Moldova’s program reviews is scheduled for mid-December. Under the program, which runs until October 2025, two more reviews are planned.
