Limba romana                                                                         Russian

PROFIT (BANKS & FINANCE) MAGAZINE
Issue No. 11, November 2006 

IMF has inspected Moldova

It’s well known that in the previous years, when Moldova had Memorandums with the Fund, IMF missions gave good appreciations to the monetary policy run by the National Bank and it’s unchanging Governor, Leonid Talmaci. As for Governments’ activity, which has  the task to promote structural  and market reforms, nobody succeeded to deserve such compliments until now.  

The IMF mission led the first review under the Poverty Reduction and Growth Facility (РRGF). The mission was headed by Thomas Richardson, Deputy Division Chief, Northeastern Division (Belarus, Moldova, Norway and Russia) in the IMF’s European Department.  

At the Press Conference hold at the end of the mission’s visit, Prime Minister Vasile Tarlev couldn’t master his feelings. 

He said he was “very pleased about the cooperation with IMF”. The Head of the Government didn’t hide his satisfaction on the atmosphere of confidence present during the negotiations held with the IMF experts.  

It deserves to be noted, that Government’s successes can be judged by the participants at the Press Conference. Besides the Prime Minister Tarlev, at the conference participated Mr. Leonid Talmaci, Governor of the NBM and Mr. Mihail Pop, Minister of Finance.

Vasile Tarlev admitted that mission’s experts together with First Deputy Prime Minister Zinaida Greceanii, responsible for the macroeconomic problems within the Government, Governor Talmaci, Finance Minister  Pop and Economy and Trade Minister Dodon, all worked in non-stop regime.  

Most of all, the Prime Minister was pleased about the fact that the IMF experts have the same views as the Government on the current problems and on the methods to solve them.  

The head of the mission, Thomas Richardson, confirmed the  productivity of the joint work done. He reminded that according to the three–year program, signed by the IMF and the Government in May 2006, the Fund will take stock of the performance in implementation of the program in the Program (РRGF) framework every 6 months.  

Referring to the assessment outcomes, Richardson said that  the mission “registered very good results”. The macroeconomic situation in the country developed with a minor deviation from the Memorandum signed with the Government in May 2006. The mission is content with the fact that in spite of the external shocks Moldovan economy faced, the financial situation in the republic is stable  and there are no premises for it to get worse.

The mission also expressed it’s satisfaction regarding the main  parameters of the budget for 2007, which has already been approved by the Parliament in two readings. 

The head of the mission  assumed that till the end of this year, Moldova will receive a disbursement of $ 47 million instead of $ 17 million as early envisaged.

At the same time, the mission expressed to the Government its proposals regarding tighter promoting of structural reforms. Richardson said that Moldova must expect tough periods ahead, that’s why he recommended “to tighten the belt and to decrease the expenditures...”. 

The mission believed that  a double increase in gas tariffs will have adverse effects during the winter months, when the gas consumption reaches its pick. IMF experts consider that the economy of the republic hasn’t passed through all the negative consequences of the wine ban  yet. 

Richardson didn’t exclude the fact that as per European countries’ experience, where there is a high competition on the market, the market share of one wine supplier will be taken by another one. In this case, comeback of the Moldovan wine to the Russian market may not be as successful and impressive as desired.  

Asked whether this sum of $ 45 million from the IMF lending for Moldova is maximum or minimum possible, Vasile Tarlev answered that “there is never enough money, because it’s never too much of it”. I think the decision of increasing the loan by $45 million is very balanced and well-thought. 

The mission expressed it’s satisfaction regarding the amendments to the Law on BNM. . The experts assumed that at the moment the Bank has a various possibilities of stopping the increase  of the consumption prices, in other words to target and control inflation.

The head of the mission stated that in fact the core inflation in Moldova in 2006 was lower than the level for nine months of the current year. The experts refer to the inflation that is imported from abroad  due to the increase in prices for energy resources and natural gas, the price of which went up from $80 tо $160 for one thousand cubic meters.  

Richardson admitted that the IMF experts hoped the amount of currency reserves in the NBM at the end of 2006 would have been bigger.   

Together with the money received from IMF, the NBM currency reserves will reach $1 billion. The optimists are pleased with a such development of the relations Moldova has with IMF, which encouraged  foreign investments in Moldovan economy, granted our country the second chance. The pessimists, though wonder why the IMF is “pumping” so many currency reserves in NBM. Because they can only be used “calm down” the market outbreaks and ensure the necessary level of imports in the country. These are not investments money, that when properly invested in the economy could be used for spurring production and expanding the exports, which are dropping  dramatically compared with imports.  
 

Alexandru VASCAUTAN