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Concluding Statement of the IMF Mission to the Republic of Moldova

June 25, 2013

An International Monetary Fund (IMF) mission for the sixth reviews under the Extended Credit Facility/Extended Fund Facility (ECF/EFF) arrangements with Moldova led by Nikolay Gueorguiev visited Chişinău during November 7–21.  

A staff team from the International Monetary Fund (IMF) visited Chişinău during June 19-24 to discuss recent economic developments and policies. The mission would like to thank the Moldovan authorities and technical staff for a warm welcome and constructive dialogue.  

After a shallow contraction in 2012, driven by a severe drought and weak external environment, Moldova’s economy shows clear signs of recovery. In the first quarter of 2013, real GDP grew by 3½ percent supported by healthy expansion of exports, remittances, and industrial production. Combined with the anticipated rebound in agriculture in the second half of the year, real GDP growth is projected to reach 4 percent in 2013. Alongside, inflation is expected to remain within the target range of the National Bank of Moldova (NBM), while the current account deficit could widen slightly on account of rising domestic demand.   

Moldova’s recent three-year IMF-supported program largely achieved its main objectives, notwithstanding the non-completion of the last program review. Key accomplishments include significantly reducing the budget deficit, keeping inflation in check, rebuilding international reserves, and preserving financial stability. Alongside, structural reforms in several areas—such as energy, education, social assistance, and the financial sector—have advanced markedly. These policies helped Moldova recover strongly from the 2009 recession, reduced its vulnerability to adverse economic shocks, and set the stage for robust economic growth. 

However, some recent developments and policy initiatives put these gains at risk. In particular, the planned radical makeover of taxation in agriculture would create a number of serious economic, social, and fiscal problems; the re-opening of loopholes in the value-added tax regime would weaken tax collection; and the ad-hoc increase in pensions and salary hikes for public dignitaries will strain budget resources. The mission advises against the introduction of the single tax in agriculture and recommends that the other measures be reconsidered or offset within the envelope of an affordable budget. 

Furthermore, a number of challenges in the banking sector need to be addressed. The rehabilitation of Banca de Economii requires a substantial capital increase, followed by strengthening of its management, and subsequent privatization through an open and transparent process. In addition, recent disputes in the banking sector underscore the need for comprehensive enforcement of the recently adopted shareholder transparency and suitability requirements, as well as protection of property rights in banks. In this context, speedy implementation of the ongoing judicial reform is crucial.  

The mission urges the authorities to safeguard the hard-won macroeconomic and financial stability by addressing these concerns and continuing on the path of economic reforms. We remain available for further policy discussions on these and other matters.



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