Initiatives on economy liberalization will only be effective if coupled with broader reforms - Johan Mathisen

The proposals on economy liberalization will only be effective in Moldova if they are coupled with a broader reform on other areas for improving the investment climate, said Johan Mathisen, IMF Resident Representative in Moldova. “We understand that part of motivation for these proposals is to increase domestic and foreign investment in Moldova”, said Mathisen, underlining that reforms are also needed in the judicial system, increase competition, as well as increase financial intermediation of savings. The international experience shows that these kinds of proposals are only effective when they are coupled with strengthening tax administration, the official added. In his words, it is extremely important that these proposals are consistent with maintaining the macroeconomic stability and lowering inflation. Mathisen said that reducing tax rates to attract investments is by itself welcome, but it has to be kept in mind that such tax cuts would have a fiscal cost, which somehow has to be covered to attain the deficit targets agreed with IMF. The IMF official said that the timing of the president’s proposals are opportune, given that IMF has a mission planning coming up in the next few weeks who will be here to negotiate a new Memorandum. Clearly the new proposals by the authorities in Moldova will form a key part of these discussions, Mathisen said.