Moldova may obtain US$89m from IMF for external reserve position and budget support

An IMF staff mission and the Moldovan authorities have reached a staff-level agreement, subject to approval by the IMF Management and Executive Board, on the completion of the first review of the Extended Credit Facility/Extended Fund Facility arrangements. Completion will allow Moldova to draw SDR 60 million (about US$89 million) to support its budget and the external reserve position, Info-Prim Neo reports. “The most important conclusion reached by the IMF mission at the end of the visit is that Moldova passed from economic stabilization to economic recovery. However, we must make sure that the economic stability is not affected anymore”, Prime Minister Vlad Filat said in a conference held jointly with the head of the IMF mission Nikolay Gueorguiev. The mission worked in Chisinau during April 28 – May 13. The IMF official said that all the performance criteria and indicative targets of the program between Moldova and the IMF have been met. Real GDP growth is expected at 2.5% in 2010, with gradual acceleration to 5% by 2012. He stressed that the effects of the recent energy price increases on inflation should weaken in the second half of the year, and inflation should return to mid-single digits in 2011. “Despite these welcome trends, the economy faces a number of challenges, most importantly the need to move away from the per-crisis model of remittance-dependent consumption-driven growth. Promoting domestic savings and exports through growth-oriented structural reforms is the Government's key medium-term challenge,” Nikolay Gueorguiev said. Vlad Filat said that the economic growth in Moldova since the start of this year has been higher than projected, but the economy will recover gradually. “The reduction in certain costs and the larger incomes at the end of 2009 helped maintain the budget deficit for last year at 6.4%. The budget revenues exceeded the projections for the first quarter of this year. The incomes from taxes are projected to reach 0.7% of the GDP,” he said. Vlad Filat also said that a high-level financial stability committee that will deal with unexpected financial problems will be set up in Moldova late in July. Under the economic program between the IMF and Moldova for 2010-2012, Moldova will obtain a loan of US$574.4 million repayable in ten years, at an annual interest rate of 0.25%.