An International Monetary Fund (IMF) mission, led by Nikolay Gueorguiev,
held discussions with the Moldovan authorities during April 28 – May 13,
2010 as part of the first review of the country’s program under the Extended
Credit Facility/Extended Fund Facility (ECF/EFF) arrangements, and the 2010
Article IV Consultation.
At the conclusion of the visit, Mr.
Gueorguiev made the following statement in Chisinau:
“An IMF staff mission and the Moldovan
authorities have reached a staff-level agreement, subject to approval by the
IMF Management and Executive Board, on the completion of the first review of
the ECF/EFF arrangements. Executive Board consideration is expected in early
July. Completion will allow Moldova to draw SDR 60 million (about US$ 89
million) to support its budget and the external reserve position.
“The program is performing well: all program
performance criteria and indicative targets have been met. Meanwhile, the
economy has been recovering, helped by increased financial stability and
rebounding activity in trading partners. Real GDP growth is expected at 2½
percent in 2010, with gradual acceleration to 5 percent by 2012. After a
sharp drop to single digits last year, the external current account in
2010-11 is expected to widen to 10½-11 percent of GDP, before gradually
declining to its medium-term equilibrium of 7½ percent of GDP. The effects
of the recent energy price increases on inflation should weaken in the
second half of the year, and inflation should return to mid-single digits in
“Despite these welcome trends, the economy
faces a number of challenges, most importantly the need to move away from
the pre-crisis model of remittance-dependent consumption-driven growth.
Promoting domestic savings and exports through growth-oriented structural
reforms is the government’s key medium-term challenge.
“Restoring fiscal sustainability after the
large deterioration in 2009 is a precondition for sustainable growth. To
this end, the authorities have decided to target a deficit of 5.4 percent of
GDP in 2010 by saving most of the additional fiscal revenue brought by
higher growth, while increasing essential social and capital expenditure.
The structural fiscal adjustment will continue in 2011, and the budget
deficit will be reduced further to 3.4 percent of GDP.
“Monetary policy aims to keep a lid on
inflation without hampering the flow of credit. The recent NBM interest rate
hikes have contributed to stabilizing inflation expectations and calming the
foreign exchange market. A pause in monetary tightening appears now
appropriate to reassess the inflation outlook.
mission also discussed further measures to support growth: strengthening
financial stability through enhanced contingency planning; unblocking bank
credit by strengthening the debt-restructuring framework; improving
sustainability of the energy sector; advancing the civil service and
education reforms; and implementing sweeping regulatory reforms.”