DEBT-RIDDEN COMMUNIST MOLDOVA SEEKS IMF CASH

Tuesday, 19 June 2001 19:08:21

CHISINAU, June 19 (Reuters) - Ex-Soviet Moldova is so burdened by debt that its new  Communist government wants to restore relations with the International Monetary Fund to help pay its creditors, a senior minister said on Tuesday.

"Today the government (finances) are in such a state that we cannot meet our obligations without external financing," Economy Minister Andrei Cucu told Reuters in an interview.

The IMF put on hold a three-year $142 million poverty reduction programme to the tiny
agricultural state, wedged between Ukraine and Romania, in February when the Communist Party swept to power after a decade in the political wilderness.

The IMF urged Moldova in May to do everything to avoid defaulting on its external debts and said it was willing to discuss debt restructuring with the country, but would first like to agree a reform plan with the new government.

Cucu, who is also deputy prime minister, said the Communist-led government was prepared to press ahead with key privatisations, keep its 2002 budget deficit within 1.6 percent of gross domestic product and talk to creditors.

"Every third lei in the budget is going to pay off debts," said Cucu, who is seen as a technocrat
and does not belong to the Communist Party. 
"We have so far met our obligations. If we don't receive new credits, people will suffer. We
won't be able to pay (state) wages, pensions, and social benefits, which could lead to social
disturbances," he said.

Moldova's foreign debt is set to grow to $779 million this year while its domestic debt is around
$150 million. Additionally, Russia's Gazprom natural gas giant says the country owes it $827 million for unpaid fuel.
Of the $142 million IMF programme agreed last year, the Fund has so far only paid out two
tranches of $24 million.
While ministers have pledged to press on with IMF-friendly policies, some Communist members of parliament have talked of scrapping privatisation plans and introducing trade tariffs.

"We will tell the IMF that we intend to continue to work with them in the framework of (their)
strategy to reduce poverty and guarantee growth," Cucu said, expressing hope that an IMF mission at the end of July could lead to renewed lending.

About 80 percent of Moldova's population live on less than one dollar a day. Securing IMF lending is crucial in order to get creditors, including the Paris Club of country lenders, to talk about restructuring the country's debt, Cucu said.

By Dmitry Chubashenko