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IMF Executive Board Concludes the Sixth Reviews Under the Extended Credit Facility and Extended Fund Facility, and Second Review Under the Resilience and Sustainability Facility for the Republic of Moldova

Press Release No. 24/480
December 17, 2024
 
  • The IMF Executive Board completed on December 17, 2024, the sixth review under the Extended Credit Facility/Extended Fund Facility (ECF/EFF), and the second review under Resilience and Sustainability Facility (RSF) with Moldova, allowing for a disbursement totaling SDR 122.2 million (about $162.6 million).
  • The recovery from adverse spillovers from Russia’s war in Ukraine and energy price shocks is taking hold. Growth picked up in 2024 and is expected to strengthen further in 2025, driven by robust domestic demand. Downside risks remain high, mainly related to Russia’s war in Ukraine and renewed energy shocks.
  • While quantitative performance of the program has been strong, implementation of structural reforms has been uneven. Further reforms to enhance fiscal performance and the allocation of public resources, strengthen energy security, strengthen governance and the rule of law, and advance climate adaptation and mitigation are key to protect Moldova against shocks and improve its growth prospects.


Washington, DC: The Executive Board of the IMF concluded the sixth reviews under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF)[1] and the second review under the Resilience and Sustainability Facility (RSF)[2], for the Republic of Moldova. This allows for a total disbursement of SDR 122.2 million (about $162.6 million) under both programs, usable for budget support. This brings Moldova’s total disbursements under the ongoing program arrangements to about $810.2 million.

“The economic recovery is taking hold with growth projected at 2.6 percent this year and 3 percent next year. The fiscal deficit is projected to decline from 5.2 percent of GDP in 2023 to 4.4 percent in 2024 and 4.0 percent in 2025 reflecting stronger-than-expected revenues, driven by buoyant wage and import growth and contained spending. Inflation has remained broadly within the National Bank of Moldova’s (NBM) 5 ± 1.5 percent target corridor since October 2023. The outlook remains subject to significant uncertainty, with large downside risks, mainly related to the war in Ukraine and renewed energy shocks. By contrast, faster progress on structural reforms, including under the EU Growth Plan for Moldova, and steady progress on the EU accession path represent upside risks.

“While quantitative performance of the program has been strong, implementation of structural reforms has been uneven. The authorities completed conditionality related to financial inclusion, the insurance sector, and state-owned enterprises, and submitted legal amendments to Parliament to strengthen NBM’s autonomy and governance. Agreed actions to establish the Anti-Corruption Court (ACC) and ensure appropriate staffing of the Anti-Corruption Prosecutor’s Office (APO) are pending. The switch from providing in-bill energy subsidies to targeted cash transfers took place in time for the current heating season and the government approved a disaster risk management program. Two other RSF reform measures are in progress but will require more time to complete.

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

“While economic recovery picked up in 2024 and is expected to continue in 2025, risks remain tilted to the downside. The authorities should pursue prudent policies and maintain buffers and robust contingency plans, including in the energy sector, while fostering growth-friendly investment and reforms, which will be also supported by the EU accession process.

Fiscal policy should remain on a gradual consolidation path to create space for addressing shocks and for growth-enhancing investment, while continuing to protect the most vulnerable. Policies should also focus on improving budget planning and capital investment execution and raising revenues.

While inflationary pressures have receded, energy and other shocks call for cautious, data-driven approach to monetary policy and for maintaining sufficient foreign exchange buffers. The base rate is now at an appropriate level, and normalization of still-high reserve requirements should be implemented gradually, carefully monitoring developments in the real estate and foreign exchange markets. The current prudential requirements on share ownership in the banking sector should be maintained to safeguard macro-financial stability. The upcoming FSAP will take stock of financial sector developments and inform the reform agenda going forward.

Continued progress on anti-corruption reforms is needed to further increase trust in Moldova’s institutions and foster socio-economic development. To this end, adoption of the law establishing a new ACC and ensuring appropriate staffing of the APO are key priorities. Efforts to strengthen the governance, autonomy, and transparency of the National Bank of Moldova should continue.

The authorities should step up implementation of the RSF arrangement to complete the two delayed reform measures for this review and advance on the remaining climate policy agenda. Progress in this area is important to build resilience to climate change, catalyze financing for green investments, and support sustainable long-term development.”

[1] The ECF provides financial assistance that is flexible and tailored to the diverse needs of low-income countries (LICs), including in times of crisis (e.g., protracted balance of payments problems). The EFF provides assistance to all countries that experience serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position. The 40-month ECF/EFF arrangements with Moldova were approved in December 2021 (Press Release) and augmented in May 2022 to increase total access under the arrangements to SDR 594.26 million (Press Release).

[2] The RSF provides longer-term financing to strengthen economic resilience and sustainability by (i) supporting policy reforms that reduce macro-critical risks associated with climate change or pandemic preparedness, and (ii) augmenting policy space and financial buffers to mitigate the risks arising from such longer-term structural challenges. Moldova’s RSF was approved in December 2023 (Press Release).
 
Moldova: Selected Economic Indicators, 2019–2029 1/
                               
      2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
                             
                5th Review

Proj.

 5th Review Proj. Proj. Proj. Proj. Proj.
                               
                             
  (Percent change, unless otherwise indicated)  
Real Sector Indicators                              
Gross domestic product                              
Real growth rate     3.6 -8.3 13.9 -4.6 0.7 2.6 2.6 3.7 3.0 4.4 5.0 5.0 5.0
Domestic Demand     4.1 -7.5 16.6 -1.9 -4.0 3.9 4.0 4.4 3.8 4.9 5.0 5.0 5.1
Consumption     3.7 -7.9 14.8 -2.2 -0.8 3.3 3.5 4.0 3.4 4.6 4.6 4.6 4.6
   Private     -0.9 2.9 17.4 -4.7 -0.3 2.7 3.0 3.5 3.0 4.4 4.4 4.4 4.4
   Public     47.6 16.1 3.0 10.7 -3.3 6.0 6.0 6.4 5.5 5.5 5.5 5.5 5.5
Gross fixed capital formation     12.0 5.6 1.9 -10.5 -1.3 5.8 5.0 6.2 5.5 6.0 6.7 6.8 7.2
      Net Exports of goods and services     -3.8 2.8 -25.6 -8.7 2.9 -9.3 -10.1 -7.7 -7.1 -6.9 -5.2 -5.1 -5.5
Exports of goods and services     8.2 -14.9 17.5 26.7 5.4 3.7 -4.3 5.4 6.4 6.7 7.9 8.7 8.3
Imports of goods and services     6.2 -9.5 21.2 18.2 -5.2 6.0 1.5 6.4 6.7 6.8 6.8 7.2 7.2
Nominal GDP (billions of Moldovan lei)     206.3 199.7 242.1 274.5 300.5 329.1 320.6 360.0 348.4 383.8 425.2 471.2 522.1
Nominal GDP (billions of U.S. dollars)     11.7 11.5 13.7 14.5 16.6 18.1 18.1 19.6 18.9 20.8 22.9 25.2 27.8
Output Gap (percent of potential GDP)     1.1 -7.4 2.0 -5.4 -3.9 … -2.9 … -2.6 -1.0 -0.1 -0.1 0.0
                               
Consumer price index (average)     4.8 3.8 5.1 28.7 13.4 5.0 4.6 5.0 5.0 5.0 5.0 5.0 5.0
Consumer price index (end of period)     7.5 0.4 13.9 30.2 4.2 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
GDP deflator     5.3 5.6 6.4 18.9 8.7 6.8 4.0 5.5 5.5 5.5 5.5 5.5 5.5
Average monthly wage (Moldovan lei)     7,356 8,104 9,114 10,531 12,355 11,475 14,000 12,475 15,125 16,575 18,250 20,100 22,125
Average monthly wage (U.S. dollars)     419 468 516 556 682 630 791 681 822 896 982 1076 1179
Unemployment rate (annual average, percent)     5.1 3.8 3.3 3.1 4.6 3.5 3.7 3.5 3.7 3.7 3.7 3.7 3.7
                             
  (Percent of GDP)
Saving-Investment Balance                              
Foreign saving     9.5 7.8 12.4 17.2 11.9 11.2 14.9 10.7 12.9 12.1 11.7 11.3 10.7
National saving     15.6 16.1 14.4 10.1 8.8 11.6 4.1 12.0 6.7 7.8 8.6 9.3 10.4
Private     13.4 17.5 13.8 8.7 9.1 13.2 5.9 12.3 7.3 7.9 8.2 8.6 9.2
Public     2.2 -1.4 0.6 1.4 -0.3 -1.5 -1.8 -0.3 -0.7 -0.1 0.4 0.7 1.1
Gross investment     25.1 23.9 26.9 27.3 20.7 22.9 19.0 22.8 19.6 19.9 20.3 20.6 21.1
Private     21.5 20.2 23.4 22.6 16.6 19.5 16.0 19.3 16.4 16.7 16.9 17.1 17.4
Public     3.6 3.6 3.5 4.7 4.2 3.3 3.0 3.4 3.1 3.3 3.4 3.5 3.7
                               
Fiscal Indicators (General Government)                              
Primary balance     -0.8 -4.7 -2.0 -2.3 -4.4 -4.0 -3.3 -2.9 -3.1 -2.8 -2.4 -2.3 -2.1
Overall balance     -1.5 -5.3 -2.6 -5.1 -5.2 -5.0 -4.4 -3.8 -4.0 -3.5 -3.1 -2.9 -2.7
Overall balance (baseline, no policy adjustment) 3/     -1.5 -5.3 -2.6 -3.2 -5.2 -5.0 -4.4 -3.8 -4.0 -3.5 -3.1 -2.9 -2.7
Stock of public and publicly guaranteed debt     28.1 35.6 34.6 36.6 36.6 38.6 38.2 38.0 39.3 38.6 37.4 36.3 34.6
                             
  (Percent change, unless otherwise indicated)
                             
Financial Indicators                              
Broad money (M3)      8.2 19.6 11.3 5.2 18.4 18.0 18.4 13.6 11.7 11.1 … … …
Velocity (GDP/end-period M3; ratio)     2.3 1.9 2.0 2.2 2.0 1.9 1.8 1.9 1.8 1.8 … … …
Reserve money     7.6 18.8 3.4 30.3 9.9 21.9 14.9 … 14.8 11.1 … … …
Credit to the economy     11.5 10.3 21.0 8.9 2.8 8.2 18.3 13.3 16.2 11.4 … … …
Credit to the economy, percent of GDP     21.4 24.4 24.4 23.4 22.0 21.7 24.4 22.5 26.1 26.4 … … …
                             
  (Millions of U.S. dollars, unless otherwise indicated)
External Sector Indicators 2/                              
Current account balance     -1117 -901 -1699 -2498 -1974 -2026 -2703 -2107 -2440 -2519 -2670 -2843 -2976
Current account balance (percent of GDP)     -9.5 -7.8 -12.4 -17.2 -11.9 -11.2 -14.9 -10.7 -12.9 -12.1 -11.7 -11.3 -10.7
Remittances and compensation of employees (net)     1,729 1,669 1,826 1,519 1,561 1,693 1,488 1,862 1,598 1,758 1,934 2,127 2,340
Gross official reserves 3/     3,060 3,784 3,902 4,474 5,453 6,009 5,871 6,000 5,757 6,150 6,326 6,546 6,856
Gross official reserves (months of imports)     6.2 5.7 4.6 5.4 6.5 6.6 6.7 6.1 6.1 5.9 5.5 5.2 5.0
                             
Exchange rate (Moldovan lei per USD, period average)     17.6 17.3 17.7 18.9 18.1 18.2 17.7 18.3 18.4 18.5 18.6 18.7 18.8
Exchange rate (Moldovan lei per USD, end of period)     17.2 17.2 17.7 19.2 17.4 18.6 18.0 18.7 18.8 18.9 19.0 19.1 18.7
Real effective exch.rate (average, percent change)     2.1 5.1 -1.6 6.9 11.0 -7.0 4.3 2.1 -0.3 2.4 2.5 2.5 2.5
External debt (percent of GDP) 4/     61.9 70.0 63.3 66.5 62.2 65.3 61.0 67.6 62.6 58.6 58.5 57.6 56.0
Debt service (percent of exports of goods and services)     13.4 15.8 11.9 8.8 11.1 12.9 14.0 13.3 14.3 15.1 13.6 11.5 10.1
                               
Sources: Moldovan authorities; and IMF staff estimates. 
1/ Data exclude Transnistria.
2/ Balance of Payments (BOP) classification is revised in line with the Sixth Balance of Payments Manual (BPM6). Review columns reflect BOP according to BPM5 classification.
3/ Includes SDR allocation in 2021 (about US$236 million). 
4/ Includes private and public and publicly guaranteed debt. 
 

IMF Communications Department
_____________________________
 MEDIA RELATIONS
PRESS OFFICER: CAMILA PEREZ
Phone: +1 202 623-7100       Email: MEDIA@IMF.org


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