Head of the IMF mission Marta de Castello Branco and Fund's Resident Representative in Moldova Edgardo Ruggiero

The state of the Moldovan economy is fragile, because it remains vulnerable to external shocks. This was said by the IMF mission head Marta de Castello Branco at
today’s press conference.

She noted in this connection that one of the reasons for this situation id the
limited structure of the Moldovan export. In case of a regional crisis, which can be similar to that in Russia in 1998, the republic, which depends on the export of certain group of goods risk to face serious problems.

According to her, the RM economic growth is conditioned by the increase in the volume of funds, transferred to the RM from its citizens, working abroad. However, this funds are mainly used for consumption.

Marta de Castello Branco has underlined that the IMF recommends the RM government to redirect these funds for investments into the real sector of economy that will allow to increase the production and export volumes.

The IMF considers the Growth and Poverty Reduction Strategy to be a good document and awaits action on its practical implementation on the part of the RM government.

Marta de Castello Branco noted that the above Strategy is the best instrument for pursuing the policy of the authorities. According to her, its last version is a well-structured document, containing clear objectives and tasks. The government has only to rework the Plan of Actions on the implementation of the measures, given in the Growth and Poverty
Reduction Strategy.

She has underlined that the key momentum for the IMF will be the one, when the RM authorities begin to realize it in practice. She has also noted that the Strategy contains stimuli for economic growth, but does not gives concrete measures.

The IMF will begin the talks on the new crediting program for Moldova after it is convinced that the republic changes the course of its economic policy. IMF mission head noted that the experts noted the low pace of reforms and the reduction in the inflow of foreign investments. The business climate lives much to be desired. She has also underlined that the IMF expects concrete and active actions for the practical implementation of the Growth and Poverty Reduction Strategy.

The IMF experts consider that the policy, pursued by the RM authorities confronts with the spirit of the Growth and Poverty Reduction Strategy. In this context, Marta de Castello Branco said that the introduced limit for the export of certain products reduces free market competition. She made a reference here to the recently approved Law on the Offshore Duty, amendments to the Law on Oil Products, the Law on the Declaration of the incomes of the high-ranking officials.

The mission head underlined that the declaration of the incomes and the property of state officials is very important for improving the management quality. Marta de Castello Branco also underscored the low course of the structural reforms, the reduction in foreign investments.

The IMF recommended that the RM government should regularly effect current payments to the external creditors in order to have their consent for the restructuring of the delayed indebtedness. The mission head noted that the amounts of the delayed payments remain being large. That is why, the RM government can reach agreement with them, if it effects accurately its current payments.

It should be note that since August 2003 the government has not paid $26 million on the credits and the interest. In 2004 the RM plans to allocate $77 million or 22% of its budget for servicing its external debt. In 2003 the RM allocated $52.5million or 17.2% of its budget for this purpose. The principal payments constituted $34.3 million and the interest constituted $18.2 million.

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