The The Executive Board of the International
Monetary Fund (IMF) today completed the second review of Moldova's
performance under the three-year Poverty Reduction and Growth Facility (PRGF)
arrangement. The completion of the review enables the release of an amount
equivalent to SDR 21.7 million (about US$33.1 million), which will bring the
total disbursements to Moldova under the PRGF arrangement to SDR 65.1
million (about US$99.2 million). The PRGF arrangement was approved on May 5,
2006 (see
Press release No. 06/91).
The Executive Board also granted a waiver for the non-observance of the
end-December 2006 performance criterion related to tariffs for district
utilities.
Following the conclusion of the Executive Board discussion, Mr. Murilo
Portugal, Deputy Managing Director and Acting Chairman, stated:
"Moldova's economic performance has been strong, and its implementation of
the PRGF-supported program has been encouraging. The authorities' adjustment
efforts have lessened the impact of last year's external shocks and helped
maintain macroeconomic stability. Growth is accelerating, international
reserves are increasing, and inflation—although still high by regional
standards—is declining steadily.
"Now that the worst effects of last year's external shocks have passed, the
challenge will be to maintain macroeconomic stability and persevere with
structural reforms aimed at reducing poverty and bolstering growth by
improving the business climate. Accelerating the development of a
well-targeted social assistance system should also be a high priority, given
possible further increases in energy prices.
"While the fiscal position has been sound, the authorities need to ensure
that higher public sector wages, coupled with reduced corporate income taxes
and a tax amnesty, will not crowd out public investment and limit room for
poverty-reducing spending. Rationalizing public sector employment, limiting
growth in non-essential spending, and accelerating tax administration reform
will be crucial.
"Monetary policy will need to remain tight to bring inflation securely into
single digits. Continued exchange rate flexibility, combined with the
strengthened capital position of the National Bank of Moldova, will help
achieve this goal.
"The authorities are advancing their agenda to improve the business climate
and promote financial sector development. In this regard, making the
recently established consolidated supervisory body for non-bank financial
institutions operational will be crucial. To mitigate reputational risks to
the financial sector stemming from the liberalization of rules governing the
legalization of capital, it will also be important to ensure that Moldova's
anti-money laundering framework is fully compatible with international
standards," Mr. Portugal said.
