IMF representative in Chisinau praises central bank and Government for efforts to curb inflation

The Resident Representative of the International Monetary Fund in Chisinau Johan Mathisen approves of the steps taken by the National Bank of Moldova and the Government to bring down inflation, Info-Prim Neo reports. Mathisen told a news conference that the monetary policy carried out by the central bank in May, when consumer prices went up, supported by the Government through a number of budgetary and fiscal policies, including the reduction in the budget spending to a zero deficit, produced good results. “It is for the first time since 2003 that Moldova has an inflation rate lower than 10% and we think that the yearly inflation for 2008 would also be not higher. Inflation was the permanent topic of the discussions between the IMF and the Moldovan authorities and our reason for permanent concern during the past few years and now this major objective included in the program signed with Moldova was achieved,” Mathisen said. The IMF representative said that a number of external factors also influenced the rate of inflation, such as the decrease in oil and food prices. But he stressed that the basic inflation rate, i.e. the inflation calculated without the fluctuation of the prices of energy and food products, is about 9%. In comparison with October last year, the rate of inflation this October was 4% owing to seasonal factors. Johan Mathisen reiterated his earlier assessments regarding the consequences of the world financial crisis for Moldova’s banking sector. He underlined that the effects will be minor because the banks in Moldova have a high level of capitalization, are liquid and the central bank has sufficient foreign exchange reserves to cover all the obligations in lei in the Moldovan economy. The consequences will be more obvious in the real sector of the economy as the export of certain Moldova products, the demand for Moldovan labor force and investment in production and other sectors will decrease. The budget revenues could also fall as a result of the smaller imports and volume of VAT on imports. “We cannot yet say exactly what size the reductions will have and what impact they will have on the real sector of Moldova’s economy as everything depends on the profoundness of the world financial crisis,” Mathisen said. He also said that the economic growth in Moldova in 2008 will be at least 6.5% due to the good harvest in the agricultural sector this year.