The three-year program supported by the IMF has been broadly successful in achieving its objectives. Comprehensive reforms have rehabilitated the banking system and strengthened financial sector governance, entrenching macro-financial stability. Prudent and well-coordinated policies are yet needed to safeguard the progress achieved. Decisive governance and institutional reforms are necessary for faster, sustainable, and inclusive growth. Such conclusions were reached by the Executive Board of the International Monetary Fund, which completed the sixth and final review of Moldova’s economic performance under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements.
The completion of this review enables the disbursement SDR 14.4 million (about US$ 20 million), bringing total disbursements under the arrangements to SDR 129.4 million (about US$ 178.7 million).n Moldova’s 40-month ECF/EFF arrangements to support the country’s economic and financial reform program, were approved on November 7, 2016, IPN reports, quoting a press release of the IMF.
Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said a key objective achieved was the rehabilitation of the banking sector, which—alongside other reforms—helped entrench macroeconomic and financial stability. However, growth remains insufficient to significantly boost living standards of the Moldovan people. Going forward, it is imperative that the authorities continue to pursue a prudent and well-coordinated policy mix, including structural reforms aimed at further strengthening the financial sector, a growth-friendly fiscal policy to increase infrastructure spending and support priority social expenditure while maintaining fiscal sustainability, and strengthening Moldova’s governance framework and institutions.
“Significant progress has been achieved in reforming the banking sector, including by securing bank shareholder transparency via fitness and probity of bank owners, improved supervisory and regulatory frameworks, unwinding bank related-party exposures, and strengthening financial safety nets. Moving ahead, addressing risks in the non-bank financial sector, improving the AML/CFT framework, and making decisive progress on asset recovery will be critical to safeguard macro-financial stability.”
Mitsuhiro Furusawa also said that the growth-friendly 2020 budget is appropriate considering the significant infrastructure and developmental needs in Moldova. In this context, the authorities’ continuous engagement with external partners is vital to secure needed financing for urgent projects. Strong implementation of priority reforms will be needed, including in the areas of revenue mobilization, streamlining tax expenditures, and increasing the efficiency of public spending and investment management. Launching comprehensive reforms of Moldova’s large SOE sector is also a key priority.
“The National Bank of Moldova’s (NBM) inflation-targeting regime remains appropriate. Additional efforts to strengthen the NBM’s operational framework and capacity will further enhance its policy credibility in the context of a flexible exchange rate regime. Safeguarding the NBM’s independence is critical to preserve hard-won gains in bank rehabilitation and fulfill its mandates of maintaining price and financial sector stability,” stated Mitsuhiro Furusawa.
He noted that enforcing the rule of law and strengthening the supervisory and regulatory frameworks—particularly those governing the non-bank financial sector, SOEs, and AML/CFT—are expected to contribute significantly to growth dividends, helping to unlock Moldova’s untapped economic potential.
The Executive Board also concluded the 2020 Article IV Consultation with Moldova.
