Mission to Chisinau: Moldova’s
economic performance has improved; structural reforms must be accelerated and
caution displayed on external debt
mission of the International Monetary Fund led by Mr. David Owen of the
European II Department completed its work on Friday, April 25, 1997.
The mission reviewed economic developments and financial performance
and assessed implementation of structural reforms under the 3-year, US$195
million extended arrangement approved by the IMF’s Board in May 1996. The mission also concluded discussions with the Moldovan
authorities on a financial program and set of structural measures to be taken
during the remainder of 1997.
mission concluded that the financial performance targets established for the
first quarter of 1997 were broadly met. The
mission commended the Moldovan authorities for the further decrease in the rate
of inflation and the continuing strength of the Moldovan leu and also took note
of the passage by Parliament of a credible state budget for 1997 and of the
substantial reduction in pension arrears. The
mission expressed concern that arrears on other budgetary expenditures increased
somewhat during the first quarter and acknowledged that fiscal pressures will
continue to be strong. The mission
commended the authorities for their initial efforts to limit and restructure
expenditures and urged that financial discipline be further strengthened,
including through strict limitation of lending of commodities by the budget and
of guarantees of bank credits. The
mission urged caution with regard to increasing the level of foreign borrowing;
this indicator reflected, in part, the slowness in structural reforms.
The mission observed that some
progress had been achieved in the implementation of structural reforms; however,
the mission urged the authorities to accelerate reforms in the agriculture and
energy sectors, in regard to land reform, in the pension system, and concerning
key legal measures (bankruptcy and collateral laws). The IMF team urged that privatization be accelerated to
stimulate investment (and budgetary revenues) and that the import tariff
increases that were approved in the 1997 budget be reversed.
These measures are essential to the growth of the Moldovan economy.
Moldova’s performance under
the 3-year extended arrangement with the IMF has improved, in comparison with
the third and fourth quarters of 1996. In
discussions with the Fund mission and with senior officials of the World Bank
who recently have visited Chi_in_u, the Moldovan authorities have reaffirmed
their commitment to an immediate strengthening of implementation of structural
reforms. On this basis, the IMF
staff is prepared to recommend approval by the Fund’s Executive Board of the
program for the remainder of 1997 that was agreed with the Government and the
National Bank during the mission, as well as disbursement of the next tranche of
funds under the extended arrangement, in an amount of approximately US$22
million. The disbursement could
take place following a Board Meeting in June.