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FLUX Newspaper Daily - Thursday, October 26, 2006

Social/Economic

Even though it praises the Government’s successful performances,

IMF is concerned with the rising inflation in Moldova

The IMF mission, on a PRGF review visit to Chişinău, expressed its worries regarding the rising rate of the inflation in the Republic of Moldova. The experts admit that one of the main causes for inflation going up is the energy resources price increase.  

In the Press Conference organized on Wednesday, the head of the IMF review mission , Thomas Richardson, declared that the core inflation, excluding the energy price increase, is still high. The IMF staff believe that Moldovan authorities could reduce the basic rate of inflation. According to Mr. Richardson’s opinion, the admissible level of inflation in Moldova should be below 10 percent. A level much higher above 10 percent would have an negative impact on economic growth and would represent a tax on the poor, asserted the expert. 

Thomas Richardson mentioned that the National Bank has the necessary mechanisms to control inflation. “Some countries tighten the monetary policy, and as a result, the interest rates increase. The interests rates could relatively rise in Moldova”, considers the IMF staff. 

Moldova has to tighten the belt 

Moreover, the IMF mission expressed the availability to assist Moldova, together with other international organizations, in overcoming the current difficult times. “Moldova will face some difficult times. That’s why, it should tighten the belt”, said Thomas Richardson. However, the IMF experts consider that Moldova will be able to reach an rapid economic growth on medium term. 

In this regard, IMF assessed positively the level of economic development. “The Republic of Moldova registered a progress in the past 6 months, in spite of the difficult economic circumstances it faces, the Government succeeded to have a economic growth”, noted Thomas Richardson, adding that both monetary and financial systems “function well and are in good hands”. 

IMF experts consider that the Government and the National Bank promote the necessary reforms for ensuring the economic growth, the export markets diversification for Moldovan products, and strengthening of the financial system. Taking all this into consideration, in particular the external factors that affected the economic situation, the IMF will increase the loan for Moldova by $ 45m. 

The mission and the authorities reached a preliminary agreement on a new MEFP for 2007. This agreement as always will need to be reviewed by the IMF Management, following which it will be submitted to the IMF’s Executive Board for consideration. At the same time, Thomas Richardson declared that the three year program, approved in May this year, envisaged a total loan amount of $118m. However, the mission intends to propose the IMF Management an increase up to $ 163. It is hoped that the IMF Executive Board will be able to consider this proposed agreement in mid-December.  

Also Mr. Tarlev, asserted at the conference that the low level of economic growth is due to the rise in natural gas prices and the Russian embargo on Moldovan wine.

According to the National Statistics Bureau, the inflation rate went up in September this year, by 9,1 percent compared with the rate registered in December 2005.  

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