IMF could supplement financing for Moldova by USD 45 mln

The Mission of the International Monetary Fund (IMF) will propose the executive Council of IMF to increase from 118 mln to 163 mln USD, the sum of money loaned to Moldova according to the Program approved in early May currently. This increase was announced by the head of the European North East Department of IMF, Thomas Richardson, on Wednesday 25 October at a press conference. The supplement worth 45 mln USD is intended to support Moldova in the process of adjustment to the difficult external circumstances that it confronts, as are the ban on wine exports to Russia and increase in gas price. Referring to the assessment of Moldova’s progress in the last six months aiming at implementing the macroeconomic policies and structural reforms, agreed in the Memorandum regarding the Economic and Financial Policies for 2006, Richardson found that the results of the program’s achievement were positive. “Despite the external shocks, the economic growth in Moldova remained positive; the financial and monetary systems remain constant and are in good hands”, the IMF official said. Thomas Richardson added that the Government has to take measures in 2007 for reducing inflation below 10%, which is a suitable percent for Moldova. Otherwise, a higher inflation rate will have a negative impact on the economic growth and will come out as an additional tax for the population. He mentioned that the Government should continue putting forth efforts with a view to diversifying the markets. IMF Mission reached a preliminary agreement with the Moldovan authorities regarding a new Memorandum of Economic and Financial Policies for 2007. This agreement will be examined by the Fund’s leadership, and then presented to the Executive Council for approval. IMF official did not give details as regards the provisions of this preliminary agreement, but voiced his hope that in the middle of December it will be approved. Though the disbursement of the first installment from the credit of 118.2 mln USD was planned for mid December, in case IMF approves the credit increase, this deadline could be modified. The value of the first installment could be also increased up to 40 mln USD compared to the previous provisions of about 17 mln USD. The IMF Mission of assessment as part of the Mechanism for financing the Poverty Reduction and Growth Facility (PRGF) was in Chisinau in the period of October 11-25. IMF Program for Moldova was approved at the beginning of May 2006, for a three-period. The document was approved on the basis of the Mechanism for the Economic Growth and Poverty Reduction Strategy (EGPRS) and will aim at achieving its objectives. PRGF is the crediting mechanism of IMF with preferential regime for the low income countries. The interest rate for the credits of PRGF is of 0.5 per cent. The credits are repayable in ten years and have a grace period of 5.5 years. The disbursements will take place every 6 months. An assessment on the part of the IMF will be carried out after each installment.