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IMF Executive Board Concludes Third Review Under the Extended Credit Facility and Extended Fund Facility Arrangements for the Republic of Moldova

Press Release No. 23/128
April 26, 2023

• The IMF Executive Board completed the third review under the Extended Credit Facility/Extended Fund Facility (ECF/EFF) arrangements with Moldova, allowing for an immediate disbursement of about US$96 million (SDR 70.95 million).
• Moldova remains in a precarious position. Russia’s war in Ukraine and its proximity to Moldova continue to fuel security concerns, while the social fabric remains fragile and stretched by high food and energy prices.
• Prudent use of contingency plans has helped reduce energy security risks and supported the most vulnerable through the cost-of-living crisis. Continued strong reform implementation—supported by the program—helps build solid foundations for sustainable long-term development.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the third review under the 40-month Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements^[1] for the Republic of Moldova^[2] This allows for the immediate disbursement of SDR 70.95 million (about US$96 million), usable for budget support, and brings Moldova’s total disbursements under the blended ECF/EFF arrangements to SDR 277.55 million (about US$371 million).

Moldova’s economy contracted sharply in 2022, reflecting spillovers from the war; a modest recovery is expected in 2023. Inflation remains high but continues to decline rapidly. Fiscal policies are focusing on mitigating the impacts of the overlapping crises and supporting economic recovery. Risks to the energy sector have abated for now, reflecting authorities’ prudent use of contingency plans. Nevertheless, t he outlook remains subject to extreme uncertainty, primarily due to risks of further escalation of the war. Moldova’s program implementation remains strong despite this challenging environment, notably with recent completion of important reforms, which can help promote the integrity, capacity, and independence of key anti-corruption institutions and enhance enforcement of the anti-corruption legal framework.

Following the Executive Board discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, made the following statement:

“Moldova remains in a precarious position due to overlapping crises. Russia’s war in Ukraine and its proximity to Moldova continue to fuel security concerns. The social fabric remains fragile and under pressure from high food and energy prices. In this context, the new government has emphasized its commitment to reforms, and program implementation remains strong despite the challenging environment.

“The economy contracted sharply in 2022, in the wake of suppressed demand from the soaring cost of living, spillovers from the war, and weaker agricultural production. A modest recovery is expected in 2023, supported by a pickup in domestic demand and better growth prospects in trading partners. Inflation continues to decelerate, and fiscal indicators remain robust. International reserves continue to provide an adequate safeguard against external shocks; while well-capitalized, liquid, and profitable banks have weathered the initial impact of the war.

“As the outlook is subject to high uncertainty, near-term priorities should remain focused on mitigating the impact of the war, ensuring energy security, adapting contingency plans to evolving risks, and maintaining an appropriate policy mix. Once near-term pressures from the crises subside, the authorities appropriately plan to reorient spending toward supporting the recovery. The current gradual monetary policy easing is appropriate given the inflation outlook. At the same time, future monetary policy decisions should remain data-driven and forward looking, with further easing being conditional on a persistent decline of both headline and core inflation.

“The authorities have implemented important reforms to strengthen anti-corruption and the rule of law. It will be essential to advance reforms in other areas, including fiscal governance, financial sector oversight, and governance and efficiency of state-owned enterprises. The authorities are also developing an ambitious agenda to address climate-related challenges. They have expressed interest in receiving financing under the IMF’s Resilience and Sustainability Facility to support their climate-related policy and development goals and to help catalyze official and private financing for green investments.”