Press Release No. 23/428
IMF Executive Board Concludes 2023
Article IV Consultation and Fourth Reviews Under the Extended Credit
Facility and Extended Fund Facility Arrangements and Approves Request for
Arrangement Under the Resilience and Sustainability Facility
December 7, 2023
- The IMF Executive Board completed the fourth review under the Extended Credit Facility/Extended Fund Facility (ECF/EFF) arrangements with Moldova, allowing for an immediate disbursement of about US$95 million (SDR 70.95 million). ECF/EFF implementation remains strong, with key reforms in fiscal governance, financial sector oversight, and the rule of law.
- The Executive Board also approved an arrangement for Moldova under the Resilience and Sustainability Facility (RSF), in an amount equivalent to US$173 million (SDR 129.375 million). The RSF will support Moldova’s efforts to strengthen resilience against climate shocks, support energy sector reforms, enhance domestic financial sector preparedness, and mobilize sustainable finance.
- Moldova faces ongoing challenges related to spillovers from Russia’s war in Ukraine. Policies are appropriately focused on crisis mitigation and recovery; as risks abate, policies should align with long-term development goals while ensuring fiscal sustainability. Ongoing institutional and policy reforms will contribute to boosting medium-term, sustainable growth.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the fourth review under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements for the Republic of Moldova. This allows for the immediate disbursement of SDR 70.95 million (about US$ 95 million), usable for budget support, and brings Moldova’s total disbursements under the blended ECF/EFF arrangements to SDR 348.5 million (about US$ 466 million). The Executive Board also approved an extension of the ECF/EFF arrangements by 6 months until October 19, 2025. The Board also approved a new arrangement Under the Resilience and Sustainability Facility (RSF) of SDR 129.375 million (about US$173 million). The RSF will support Moldova’s efforts to strengthen resilience against climate shocks, support energy sector reforms, enhance domestic financial sector preparedness, and mobilize sustainable finance.
Moldova continues to grapple with persistent challenges from spillovers of Russia’s war in Ukraine. ECF/EFF implementation remains strong despite these challenges, with completion of important reforms related to fiscal governance, financial sector oversight, and the rule of law. Contingency plans have alleviated the effects of the energy crisis, with progress in diversifying energy sources and enhancing protection for the vulnerable population during winter months. Inflation decelerated rapidly due to timely monetary responses and declining food and fuel prices. A modest recovery is expected in 2023, supported by agriculture, increased consumption, and investment. Near-term policy priorities are appropriately focused on mitigating crisis impacts and supporting recovery. As risks abate, policies should be increasingly geared to long-term development goals while preserving fiscal sustainability. The effective implementation of the ECF/EFF and RSF reforms, together with strengthening the labor market and enhancing productivity will support long-term, sustainable development, and convergence toward EU income levels.
Executive Board Assessment
Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for their strong program ownership and performance under the ECF/EFF arrangements and considered that the new RSF arrangement will help strengthen climate resilience efforts. Directors cautioned that despite the favorable outlook, Moldova continues to face significant headwinds from multiple crises and large downside risks, including from spillovers from Russia’s war in Ukraine and energy shocks. They encouraged continued focus on mitigating shocks, aiding the recovery, and supporting sustainable, green growth, and EU accession efforts.
Directors agreed that fiscal policy should remain focused on mitigating the impact of the multiple crises, supporting the recovery, and advancing longer‑term reforms. They underscore that near‑term fiscal policy should continue to support the most vulnerable and safeguard energy security. Over the medium term, fiscal consolidation, while addressing development needs, is important to preserve fiscal and debt sustainability. Directors welcomed the authorities’ plans to enhance revenue mobilization and improve expenditure quality and efficiency. They recommended steps to enhance public financial management and address recurrent budget under‑execution.
Directors recognized the central bank’s strong, timely response to help mitigate high inflation and recommended that monetary policy remain data‑driven and forward‑looking. Directors highlighted the need to continue to reduce high reserve requirements to support bank liquidity and credit intermediation. They emphasized that further progress on strengthening the independence of the central bank will preserve policy credibility and effectiveness. Directors underscored the importance of maintaining financial sector stability, enhancing oversight, and improving financial inclusion.
Directors recognized recent reforms to strengthen governance, address high‑level corruption and bolster the rule of law. Important measures include strengthening the labor market and enhancing the efficiency of state‑owned enterprises. Directors emphasized that maintaining strong momentum on these reforms is crucial to contain fiscal risks, foster trust in public institutions, and improve the business environment. They noted that the RSF will support Moldova’s efforts to enhance resilience to climate shocks, implement energy sector reforms, and ensure mobilization of sustainable finance.
It is expected that the next Article IV consultation with Republic of Moldova will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.
 Arrangements under the ECF provide financial assistance that is more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis (e.g., protracted balance of payments problems). Those under the EFF provide assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position.