mission of the European Department of the International Monetary Fund (IMF)
headed by Mr. Graeme Justice visited Chişinău during December 5-21, 2007.
The main purpose of the staff visit has been to conduct the Third Review of
the performance under the PRGF arrangement
and hold the discussions for
regular Article IV consultations.
The mission assessed performance in
implementing macroeconomic policies and structural reforms agreed in the
Memorandum on Economic and Financial Policies (MEFP) of 2007, and held
discussions for the new MEFP for 2008. The mission was pleased to note that
performance under the program so far has been positive.
The mission has noted that growth has been
remarkably resilient in the face of shocks, and investment is picking up,
supported by foreign direct investment (FDI) and strong remittances. The
resolution of the wine embargo, and the approval of the trade agreement with
the European Union provide an opportunity to step up the pace of reforms and
High inflation remains the main concern.
Good progress by the National Bank of Moldova (NBM) in reducing inflation
since late 2006 was set back by the drought, causing a spike in food prices,
in line with regional trends. A renewed effort will be needed to ensure
inflation is brought down to single digits in 2008. Also, fiscal policy will
need to continue to withdraw fiscal stimulus and support disinflation
efforts in early 2008.
Key challenges for the government are to
ensure that growth is supported by appropriate public sector restructuring
to met the needs of a rapidly evolving economy, better physical and service
infrastructure, energy sector restructuring, a friendly business
environment, and better education and social services that make certain the
benefits of economic transformation are felt by all.
The mission reached a preliminary agreement
with the Moldovan authorities on a MEFP for 2008. 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. It is hoped that
the IMF Executive Board will be able to consider this proposed agreement in
early March 2008.