June 4, 2021
Opening Remarks at the
"Post-Pandemic Economic Recovery: Realities and Prospects",
Organized by the National Bank of Moldova
Chawani, IMF Resident Representative in Moldova
Your Excellency Madam President; Honorable Governor;
Distinguished Ladies and Gentlemen
It is a great honor to be invited to speak at this celebration of
the 30th anniversary of the National Bank of Moldova. On behalf of
the IMF, let me congratulate the Bank on reaching this historic milestone. I
also extend congratulations to all whose work and dedication has ensured the
Bank’s place as a successful and well-respected institution.
Hearing the President and the Governor speak, it is easy to
arrive at the conclusion that the Bank has enjoyed a rich and extensive history,
which dates back almost as far as the state of Moldova itself and during which
time it has contributed to the development of the economy. Today, the NBM should
take great pride of its many accomplishments during the past three decades.
I would particularly highlight the most recent period when, very
wisely and with great success, I would say, the NBM has recorded progress
especially in ensuring transparent shareholder structures, upgrading the banking
resolution framework, strengthening governance, and its regulatory and
But I am mindful that the theme of the event ably captures the
spirit that in addition to celebrating these accomplishments, anniversaries also
provide a time for reflection and self-assessment. The story of the Bank
demonstrates that with all the best intentions and efforts, sometimes unexpected
factors can threaten our progress.
Since last year, the pandemic has hit Moldova hard. The overall
response has been fragmented and poorly targeted due to established public
financial management weaknesses and politics. Despite these challenges, the NBM
has stepped up its efforts by easing monetary policy considerably, providing
sufficient liquidity and deploying macroprudential tools to keep credit flowing.
More recently exposure to political pressures has derailed
reforms at the Bank. While the amendments to the NBM Law strengthened key legal
safeguards, including the autonomy, governance framework and transparency and
accountability practices, the NBMs autonomy has still been targeted by both the
executive and legislature in recent years. Recent legislative initiatives
include repealing the 2016 securitization law; politically motivated scrutiny of
the NBM’s professional judgment; and a slew of investigations, risk undermining
the rehabilitation of the banking system.
Clearly the path ahead has both significant challenges and
Monetary policy should remain accommodative as long as inflation
pressures remain subdued. The NBM must continue deploying its multiple
instruments however, unnecessarily prolonged monetary policy easing could
threaten financial stability, and eventually lead to the de-anchoring of
inflations expectations, putting economic growth at risk. It is important that
monetary policy evolve in a data-dependent manner, providing the necessary
stimulus to ensure a sustainable and inclusive economic recovery, while
progressively unwinding the support.
The link between the economic and health crises imply that
policies to durably end the pandemic are most relevant.
Inevitably, pandemic policy is now the best economic policy. The pandemic has
led to output losses including by capital and labor-intensive sectors that have
been hit hard and the possibility of not recovering lost investments. The
increased scarring puts a premium on policies to support activity. There is need
to support viable firms but also limit insolvency scars by implementing
effective bankruptcy and restructuring frameworks.
Once the recovery firms up, policies will need to transition into
unlocking growth and reinforcing institutional governance.
This implies bold and transformative reforms would be more urgent
especially in the area of strengthening autonomy and governance in the financial
sector. Delivering on these reforms, while overcoming the scarring from the
crisis would require difficult policy choices. But there is no substitute for
having a fully instituted management at the Bank, ensuring legal protection of
its staff, preserving finality of its decisions, and enhancing its governance.
At the IMF, we are aware that more resources are needed to
anchor the recovery and support activity. Much more is needed to boost
spending on the pandemic response, to maintain adequate reserves, and to
accelerate the recovery. Moldova like its peers will need to invest more just to
return to the path of catching up to higher income levels.
Meeting such needs will require comprehensive and concerted
efforts including policy actions to mobilize domestic revenues, boost the
quality of public spending, and improve the business climate.
A new Special Drawing Rights allocation by the IMF would be an
important step, providing reserves and liquidity at a timely point in the
While the IMF stands ready to support Moldova to carry forward
its reform agenda, meeting the total needs will require significant
contributions from other financial institutions. This makes the need for a more
structured vehicle to support progress more imperative and we sincerely hope
that conditions will permit a discussion of a successor arrangement
I thank you all for your attention and echo the IMF warmest
wishes to the NBM.