The Republic of Moldova will be immediate disbursed SDR 133 million (about $175.2 million) usable for budget support by the International Monetary Fund (IMF). The IMF Executive Board concluded the fifth review under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF), and the first review under the Resilience and Sustainability Facility (RSF), for the Republic of Moldova. Thus, Moldova’s total disbursements under the ongoing program arrangements will amount to about $636.5 million, IPN reports.
According to the IMF, growth has been weaker than anticipated owing to the persistent impact of spillovers from Russia’s war in Ukraine. The economy grew by 0.7 percent in 2023, and the recovery is expected to continue, although at a weaker-than-previously-projected pace. Fiscal policy has remained focused on protecting the most vulnerable and supporting the economy. While relatively robust growth is projected in the medium term, short-term risks remain large and tilted to the downside. Program performance remains broadly on track despite the challenging environment. The authorities should maintain strong reform momentum, critical to support Moldova’s prosperity.
Following the Executive Board discussion, Kenji Okamura, Deputy Managing Director and Acting Chair, said that Moldova’s performance under the ECF/EFF Arrangements remains broadly on track, although with some delays on structural reforms. While the economic recovery from the multiple shocks has been slower than anticipated, with growth lower in 2023 and more subdued in 2024, inflation has remained within the NBM’s target band since last October and relatively robust medium-term growth is projected. Given that risks remain large and to the downside, the authorities should continue to focus on strengthening contingency planning and maintaining agile policies, strengthening energy security, and fostering growth-friendly reforms, which will be supported by the EU accession process.
“Fiscal policy should remain focused on protecting the most vulnerable and on supporting the economy. At the same time, maintaining a gradual fiscal consolidation is needed to build buffers and preserve debt sustainability, especially given the expected decline in external grants over the medium term,” stated Kenji Okamura.
According to him, with inflationary pressures contained, monetary policy should pursue a gradual normalization of still-high reserve requirements, which will support domestic demand. Given the uncertain environment, the base rate should be maintained at the current level. The authorities’ commitment to maintain the current prudential requirements on share ownership in the banking sector is welcome and important to safeguard macro-financial stability.
Additional reforms are needed to strengthen the governance, autonomy, transparency, and accountability of the NBM. The authorities should continue working closely with staff to implement the measures identified through the recent diagnostic of the NBM in a timely manner. These reforms are essential to ensure monetary policy credibility and macro-financial stability.
Continued progress on anti-corruption reforms is needed to further increase trust in Moldova’s institutions and foster socio-economic development. Adoption of the law establishing a new Anti-Corruption Court, expected this summer, would be a key welcomed development, and the authorities should operationalize the Court quickly and effectively.
