IMF MISSION REACHED A PRELIMINARY AGREEMENT WITH THE
GOVERNMENT, BUT THERE ARE STILL MANY ISSUES TO BE RESOLVED
For the financing to be resumed, the Moldovan Government before July 21
has to resolve a all of the agreed upon prior actions, told Marta de
Castello-Branco Chief of IMF mission, Europe II adviser to news conference.
Castello-Branco has stated that the IMF mission has reached a preliminary
agreement with the Government concerning implementation of program agreed upon
with IMF, although there are still many issues to be resolved prior to resuming
external financing. A list of conditions stipulated by the IMF representative
includes removing export barriers, revising State and Social Insurance budgets,
implementing pre-shipment inspection, creating favorable business environment,
ceasing state interference into small and medium scale business as well as
creating more favorable investment conditions.
International community is closely following concrete steps taken by the
Government, which needs to actually prove that foreign investors are welcome to
Moldova, highlighted Marta de Castello-Branco.
Chief of IMF mission was surprised with a number of actions attempted by the
Government, especially by adoption of certain decisions that have no financial
coverage, among which Law of veterans, increase of pensions by 50 lei, etc.
The Government promotes certain reforms requiring additional expenditures of
which neither IMF nor WB are aware. Such an approach affects programs agreed
upon with the international financial organizations, said IMF official.
At closing the
press conference Marta de Castello-Branco has stated that if all the conditions
agreed with IMF will be accomplished then in September, the IMF Executive Board
will approve a tranche worth around $ 15 million as part of Sustainable Growth
and Poverty Reduction Program agreed by IMF and Government in 1999. The overall
value of the program is SDR 110,88 million ($ 147 million), out of which
disbursed were only three tranches about $ 12,5 million each. In case of
reaching an agreement with Chisinau, IMF will extend the current program
implementation, which expired in December 2003 for another year. Otherwise it
will take to negotiate a new program between Moldova and IMF.
THE REPUBLIC OF MOLDOVA NEEDS TO MAKE UP ITS MIND ON WHICH WAY TO GO
Recent developments in Moldova show a tendency towards planned economy, says
Marta de Castello-Branco, Europe II Department adviser, concluding her 2-weeks
visit to Chisinau.
“The key issue remains structural reform and which way Moldova wants to go:
forward to market economy or back to planned economy. Many of recently taken
decisions are in the spirit of planned economy”, said IMF Mission Chief.
In response to mass-media’s request Marta de Castello-Branco has expressed her
concern vis-à-vis administrative-territorial reform implying return to former
Soviet style districts and assessed this decision taken by the Chisinau
authorities as a purely political decision and also “one step backwards”.
concerned that returning back to districts will deteriorate the quality of
services rendered, while local authorities will become fully dependent on
central ones. Therefore I have suggested that the Government shall examine
relations between these two structures”, highlighted IMF official. She has also
stated that in making administrative-territorial reform, the Executive power
will have to choose between poor efficiency and considerable costs.
It is worthy to notice that when referring to resuming external financing to
Moldova, Marta de Castello-Branco has stated that this is the last chance to
finalize Fund program with the Republic of Moldova, which started in December
2000, provided the Government will meet all the conditions agreed upon with IMF.
MISSION HEAD BELIEVES THAT REMITTANCES FROM ABROAD HAVE A RATHER POSITIVE
Mission Chief Marta de Castello-Branco, Europe II Department adviser has
highlighted that cash remitted from persons working abroad produces a
beneficiary impact onto economy.
Mission Chief has estimated with some approximation that annual remittances
to Moldova through Western Union amount to $ 500 million.
“Of course, the total value of transactions is much higher since many of
those working abroad have their own ways of bringing in the currency”, said IMF
official. According to Marta de Castello-Branco cash remittances from abroad
have contributed to exchange rate stability, growth of imports (especially
consumer goods) and financing construction works in the Republic of Moldova.
During a press conference held on closure of 2-weeks mission visit to
Chisinau, Marta de Castello-Branco has stated that IMF has revised forecast of
macroeconomic indicators. As a result projection of GDP growth and inflation was
revised to increase GDP growth rate up to 6% and inflation rate up to 8%.
According to IMF representative the latter will depend on the size of deflation
expected in summer of the current year. IMF has taken into account this year’s
crisis in the agricultural sector, which will trigger increase of prices onto
farm products this fall, although agricultural sector of Moldova is repeatedly
subject to unfavorable climatic conditions. A solution can be found through
economic growth in the neighboring countries – Russia and Ukraine, the key
economic partners of RM, which can thus procure more from Moldovan businesses,
said in continuation Marta de Castello-Branco.
Referring to PM Tarlev’s request to extend “more extensive” financing of the
Republic of Moldova, the IMF official has stated that the countries can benefit
on financing from the institution which they represent depending on their share
of participation with the Fund.