IMF could approve a USD 33 mln funding for Moldova in late June

The International Monetary Fund (IMF) could approve late in June a new increased disbursement to support the implementation of macroeconomic policies and structural reforms in Moldova. The second instalment could amount to USD 33 mln, compared to earlier planned MDL 16.9 mln for each quarter of the year. Thomas Richardson, Deputy Division Chief, Northeastern Division (Belarus, Moldova, Norway and Russia) in the IMF’s European Department, told Tuesday a news conference that the mission that he headed between April 25 and May 8 assessed performance over the previous six months in implementing macroeconomic policies and structural reforms agreed in the Memorandum on Economic and Financial Policies (MEPF). The mission was pleased to note that performance under the program so far has been positive. The mission reached a preliminary agreement with the Moldovan authorities on a MEFP for the remainder of 2007. This agreement, as always, will need to be reviewed by the IMF Management, following which it will be submitted to the IMF’s Executive Board for consideration. It is hoped that the IMF Executive Board will be able to consider this proposed agreement in late June 2007. Richardson mentioned that most of the disbursements have the aim to support the Government in overcoming the negative consequences of the past year’s external shocks. In December, the second instalment provided by IMF under the PRGF Mechanism (Poverty Reduction and Growth Facility) was in the amount of USD 48.2. Thomas Richardson was satisfied with the indexes of the economic growth registered by Moldova in the first quarter of this year, mentioning that by the end of the year the economic growth will be robust compared to the mission’s previous forecasts – 5%. At the same time, he is hopeful that by means of competent monetary policies of the National Bank, the rate of inflation will be set under 10% by the end of the year, as agreed with EMF. Referring to the initiatives on the fiscal amnesty and on establishing a zero rate tax on individual income, Richardson admitted that in the short run such tax cuts could have a fiscal cost. However, he mentioned that IMF will back the Government in strengthening tax administration to attain the deficit targets agreed with IMF. On 5 May 2006 IMF’s Executive Board approved the PGRF arrangement with Moldova in the total amount of about USD 118.5 mln, the first instalment of which – about USD 17 mln – was transferred to the National Bank of Moldova in mid-May 2006. On 15 December 2006 IMF’s Executive Board approved an increase in the size of the loan to about USD 167 mln. The second disbursement was approved for an amount equivalent to about USD 48.2 mln. The PRGF is the IMF's concessional facility for low income countries. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5.5-year grace period.