The Executive Board of the International Monetary Fund (IMF) concluded the third review under the 40-month Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements for the Republic of Moldova. This allows for the immediate disbursement of SDR 70.95 million (about US$96 million), usable for budget support, and brings Moldova’s total disbursements under the blended ECF/EFF arrangements to SDR 277.55 million (about US$371 million), IPN reports.
Kenji Okamura, Deputy Managing Director and Acting Chair, said that Moldova remains in a precarious position due to overlapping crises. Russia’s war in Ukraine and its proximity to Moldova continue to fuel security concerns. The social fabric remains fragile and under pressure from high food and energy prices. In this context, the new government has emphasized its commitment to reforms, and program implementation remains strong despite the challenging environment.
“The economy contracted sharply in 2022, in the wake of suppressed demand from the soaring cost of living, spillovers from the war, and weaker agricultural production. A modest recovery is expected in 2023, supported by a pickup in domestic demand and better growth prospects in trading partners. Inflation continues to decelerate, and fiscal indicators remain robust. International reserves continue to provide an adequate safeguard against external shocks; while well-capitalized, liquid, and profitable banks have weathered the initial impact of the war.
“As the outlook is subject to high uncertainty, near-term priorities should remain focused on mitigating the impact of the war, ensuring energy security, adapting contingency plans to evolving risks, and maintaining an appropriate policy mix. Once near-term pressures from the crises subside, the authorities appropriately plan to reorient spending toward supporting the recovery. The current gradual monetary policy easing is appropriate given the inflation outlook. At the same time, future monetary policy decisions should remain data-driven and forward looking, with further easing being conditional on a persistent decline of both headline and core inflation,” stated Kenji Okamura.
The 40-month ECF/EFF arrangements were approved in December 2021 and augmented in May 2022 to increase total access under the arrangements to SDR 594.26 million.
