The 40-month program’s objectives are to
sustain the post-pandemic recovery, address pressing developmental
needs, and strengthen governance and institutional frameworks.
The key policy challenge is to design a
prudent policy mix to mitigate the impact of the pandemic and pursue
developmental objectives without endangering debt sustainability.
Structural reforms will aim to address
vulnerabilities to improve the rule of law and the anti-corruption
framework and strengthen fiscal and financial governance, ultimately
accelerating income convergence between Moldova and European peers.
WASHINGTON, DC: The Executive Board of the International Monetary
Fund (IMF) approved Moldova’s requests for an economic reform program under the
Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements
today. The approval of these requests enables the disbursement about US$79.8
million (SDR 57.2 million). Total envisaged disbursements under Moldova’s
40-month ECF/EFF arrangements would amount to about US$558.3 million (SDR 400.0
The Executive Board today also concluded the 2021 Article IV Consultation with
Moldova. A separate press release will follow.
Following the Executive Board discussion, Mr. Kenji Okamura, Deputy Managing
Director and Acting Chair, made the following statement:
authorities have made commendable progress in rehabilitating the banking sector
and bolstering macro-financial stability. However, the COVID-19 pandemic,
drought in 2020, and the ongoing surge in global energy prices, have slowed
economic activity, intensified downside risks, and complicated policy making.
While emergency financial assistance from international partners helped cushion
the pandemic’s economic impact, Moldova remains among the poorest countries in
Europe, with long-standing governance and structural weaknesses inhibiting
income convergence. Against this backdrop, the IMF-supported programs under the
Extended Fund Facility and Extended Credit Facility have three main objectives:
first, sustain the post-pandemic recovery; second, address pressing
developmental needs, and third, strengthen Moldova’s governance and
responded quickly to address the negative macro-economic impact of the combined
shocks, focusing on urgently needed policies in support of the healthcare
system, social assistance programs, and business activity. However, the
under-execution of approved COVID-related crisis measures emphasizes the need to
address longstanding capacity constraints. A strong policy mix, including a
near-term fiscal stance that carefully balances targeted social assistance and
development spending, is needed to sustain the recovery.
implemented by the National Bank of Moldova (NBM) and supported by the IMF have
proven vital for preserving macro-financial stability during the crisis. Looking
ahead, the authorities should continue their efforts to improve the national
bank’s policy credibility and effectiveness; bolster financial sector
supervision, financial crisis management, and macroprudential frameworks; and
strengthen the national bank’s governance, transparency, and accountability.
Safeguarding the NBM’s independence remains a critical precondition for its
effectiveness and credibility. In addition, addressing significant
vulnerabilities in the non-bank financial sector, strengthening the AML/CFT
regime, and making decisive progress on asset recovery will be necessary to
safeguard macro-financial stability.
“As the recovery takes hold, the policy mix will
to evolve to address Moldova’s urgent developmental objectives, including
significant infrastructure gaps, and to accelerate income convergence with
European peers without endangering debt sustainability. On the fiscal front,
improving domestic revenue mobilization, increasing public spending efficiency,
decisively addressing fiscal risks emanating from state-owned enterprises, and
continuing efforts to improve budget quality and transparency are vital to
improve fiscal outcomes and nurture more responsive and impactful fiscal policy.
Continued engagement with developmental partners to leverage their expertise and
secure needed concessional financing is needed.
“The authorities’ ambitious reforms
center on addressing Moldova’s longstanding and widespread governance weaknesses
and institutional vulnerabilities. The proposed measures—if appropriately
sequenced and resolutely implemented—are expected to yield large medium-term
gains, unlocking Moldova’s untapped economic potential and accelerating its
income convergence with European peers. Robust reform efforts to strengthen the
rule of law, reduce corruption, and embrace the independence of key institutions
will be instrumental to improving the business environment, fostering
competition and innovation, unlocking private investment, curbing brain drain,
accelerating human capital accumulation, and increasing productivity.”
PRESS OFFICER: Raphael Anspach
Phone: +1 202 623-7100