The Moldovan authorities and the IMF team have reached a staff-level agreement on the augmentation of the Extended Credit Facility (ECF)-Extended Fund Facility (EFF) arrangements. The team will recommend increasing IMF support to Moldova by SDR194.6 million (about $267 million), bringing the total financing envelope under the program to SDR594.3 million (about $815 million), it is said in a press release of the IMF that is quoted by IPN.

The authorities have requested an increase of about US$267 million in financial support to help Moldova cope with the impact of the war in Ukraine and surging international energy and food prices. An international Monetary Fund (IMF) mission led by Ruben Atoyan conducted discussions on the augmentation of access under the Extended Credit Facility – Extended Fund Facility (ECF-EFF) arrangements during April 4-11, 2022.

This additional financial support will help meet the urgent balance of payments financing needs arising from large adverse shocks, including the war in Ukraine and international sanctions on Russia and Belarus, and catalyze support from the international community. The agreement is subject to approval by the IMF Executive Board, which is scheduled to consider the augmentation request in May. The first disbursement under the augmented program in the amount of SDR108.2 million (about $149 million) would be made available immediately with the completion of the first review and allocated for budgetary support.

The war in Ukraine has resulted in significant spillovers to the Moldovan economy. Real GDP is expected to stagnate this year, with projections subject to high uncertainty. Disruptions in trade and higher commodity prices are expected to widen the current account deficit to 13.3 percent of GDP this year. Urgent balance of payments financing needs arising from the escalating shocks are estimated to be about $1.7 billion in 2022-23 and expected to be financed by IMF financing and other donor assistance.

The fiscal deficit is expected to widen to about 7.2 percent of GDP this year due to lower revenues and higher spending on humanitarian and economic support. The evolving fiscal financing gap would be closed by mobilizing financing from the IMF and other partners to complement that available from domestic capital markets. “While public debt is projected to increase in the near term, the authorities are committed to maintaining debt sustainability as the crisis abates, while preserving fiscal space for ambitious governance reforms and development spending,” runs the IMF’s press release.

“The IMF team welcomes the authorities’ commitment to the program’s core aims of strengthening governance and institutional frameworks and addressing long-standing developmental needs. The ambitious structural reform agenda remain critical for creating conditions for sustainable and inclusive long-term growth.”