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"Moldova has a limited choice of policy options available"

Interview with Johan Mathisen, IMF's Resident Representative in Moldova

IMF included Moldova in the list of countries vulnerable to the crisis, and experts simulated two scenarios an optimistic and a pessimistic one. The second one, even at the theoretical level, envisages dramatic outcomes for Moldova: economic recession and depletion of [international] reserves. What is the probability of it coming true? It seems though that we are taking the worst scenario route, if we consider the decrease of international reserves by about USD 400 million in only two months and the first six days of March.

First of all, let me say that this paper was a theoretical cross-country exercise carried out for a large number of low income countries that are being affected by the global slowdown. Moldova was included as it is one of the few low income countries in Europe. Note that similar exercises have also been carried out for higher income countries in the region. The impact of the global recession for the whole region as a whole has been more severe than initially anticipated, and many countries are now coming to the IMF for assistance. As a consequence, the impact of the recession on the reserves of many central banks has been more severe than been at first forecast. Indeed, as you point out the impact on the National Bank of Moldova's reserves has been substantial, but the stock of reserves remains high.

In your opinion, what path could Moldova take to mitigate the impact of the crisis, and if there is a number of scenarios, which one would be the most effective and the least painful? Which would be the best anti-crisis solution for Moldova?

Unfortunately, like other countries in the region Moldova's policy options are limited by financing constraints and the need to avoid unduly increasing the debt burden for the country. Indeed, as you say there are a number of scenarios, and the right solution for Moldova will depend on a number of sometimes competing objectives, including the need to address the social consequences of the recession, maintaining macroeconomic stability, and while preserving competitiveness to ensure that Moldova has a quick recovery.

After the last visit of Graeme Justice, IMF Mission Chief, to Moldova it was announced that the Fund is ready to provide financial assistance to the Republic of Moldova to mitigate the impact of the crisis. Are there any estimates how much money might be needed to help our country to save itself from the crisis?

The IMF has been supporting Moldovan, and stands ready to provide further assistance if called for. No specific assistance has been discussed. However, as you may have heard the international community has committed to a substantial increase in the IMF's resources to help countries overcome the impact of the global slowdown.

What consequences might occur from keeping the national currency strong and, on the other hand, high lending interest rates in the context of deflation and decrease of broad money?

With the global slowdown countries have faced substantial preserves. The immediate challenge for the authorities has been to preserve economic stability and orderly economic adjustment. As the global recession eases the challenge will increasingly be how to promote growth and a rapid recovery.

When will discussions on a new program start?

This is for the government to decide.

Did you already feel the impact of the crisis yourself, as an individual?

As an individual who has worked many year of trying to improve Moldova's economic prospects, I am of course concerned, and hope I can be of assistance during these difficult times.


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