In Moldova the IMF funds were used properly
  

- I was and still am an optimist about Moldova, though this year was very complicated. Sometimes I have doubts, you see, politics in Moldova is very unstable. The lack of majority in the Parliament hinders the reform process. In the last year, there were many ups and downs, which impacted policy. I am sure some of political developments hindered  investments into Moldova. Nevertheless, by virtue of my work, I have to be an optimist, for if I lose hope, I should not be in this job. One of the reasons that I remain an optimist is that now we are very close to a new program with Moldova. Also I think, that as early as in the upcoming 2-3 weeks it will become clear, whether or not we can resume lending and how fast. I reviewed the results of the 2000 budget implementation for the first 8 months of 2000. They indicate that the commitment deficit of the budget is very small. Revenues performance is better than it was projected in April, and the expenditures are lower than earlier envisaged. With no external financing and privatization, it will be very difficult to finance the 2001 budget, control inflation and service the country's debt. The Government could ask the National Bank for financing, but this will result in higher inflation and, therefore, will diminish the purchasing power of the population. 

- And all the same, many do not perceive why the IMF is being so tough in conditioning its lending on privatization?

- It is important to move ahead with privatization of wineries and tobacco factories. It is important to stimulate growth and agricultural production. Agriculture is too important to ignore in Moldova. It employs the majority of the population. It is very difficult to have economic growth without advancing agriculture. It is difficult in this case to reduce poverty, which predominantly occurs in the countryside without agricultural reform and, notably, privatization of the inefficient wineries and tobacco companies.

- Recently there have been debates in USA going on between the presidential candidates, where George Bush the junior has accused the IMF management claiming that for a number of years influential people have pocketed the funds of this organization. There is a similar perception in Moldova...

- The audits made by international renowned companies on the use of IMF money has not disclosed anything unusual. Over the last couple of years, there have been much concern on the alleged misuse of IMF money, but we are confident that in Moldova these resources were not misused. Over the last year IMF has taken a number of actions to protect its resources. For example, now IMF requires that the central banks of countries receiving lending be subject to external audit. Also, to secure Fund's resources, we now require more detailed disclosures, including the annual reports of central banks. It applies to all countries, which we lend money to. As to Moldova, I would like to stress again, that in your country the IMF money has been used properly. The National Bank of Moldova was subject to three external audits performed by Price Waterhouse Coopers. And these audits have shown that all transactions of the National Bank were properly performed. It has not revealed anything that might be a cause for concern.

- How does the IMF perceive the rather strong criticism, which it comes under?

- Over the last 2-3 years, some criticism of the IMF was partly justified. In response, the Fund has attempted to learn lessons from its mistakes. However, there is also much misunderstanding about what the IMF does. I think many people do not realize how difficult it is to promote economic reforms under the circumstances where vested interests are powerful. We try to help the country, if it has difficulties with its balance of payments. And we ask that the policies which led to BOP problems, be corrected. From our part, we are ready to offer resources to help on certain conditions. 

- There is a perception, that the IMF has allegedly made a big mistake by not giving Moldova credits on concessional terms. Do you share this view, to the extent that it is a mistake?

- Our Board recently approved new facility designed to promote growth and address poverty issues. The facility provides resources on concessional terms, at an interest rate of 0.5%. This facility was approved by the Fund in September 1999. We have been working with the Government for several months on this new program. Since 1999, however, one Government has resigned, there have been amendments to the Constitution and the privatization bill was rejected twice. If there is any explanation for why we were not moving faster, that is because the environment would not allow us to. Some say, that we were far too tough, others - say the opposite. Some believe we should have been giving money faster and easier. Without an appropriate environment that favors reforms - giving money could harm if it is not associated with real reform.

- Many have projected a sharp depreciation of lei during this fall. That did not occur. How will you explain the stability of local currency?

- I think that, to a great extent, the credit for that should be given to the National Bank and the Government. The monetary and fiscal policies over the last 10 months were very good. The fact that the local currency got stronger and the National Bank is buying currency, and the bank's reserves exceed $200 million, notwithstanding the fact that there were a lot of debts being paid off - serves as an indication of a good budget execution. I know, that the economic condition is not improving. I do not think there is growth yet, or that the living standards have improved. I believe, that the year 2000, for ordinary people turned out to be worse than 1999. Yet, with the good policy, which is now being implemented, Moldova has the potential to reduce poverty in 2001. Low inflation and steady exchange rate are very important in this respect. But it is not enough. You need privatization, you need foreign investments.

- Some people believe that Moldova's economy relies on money transfers from abroad. Can this lead one to believe that the size of these transfers is indeed very significant?

- I think, these transfers are very substantial, since a many Moldovans work abroad. I believe it has positive and negative aspects. A good thing about it is that there is money coming to Moldova. A bad thing is that Moldova is losing its best and brightest people. They are emigrating to seek more opportunities. It makes the task of improving the living standards even more important. Over the last 8-9 years, GDP dropped by 60%. We certainly hope that it has already achieved its lowest level, that is, from now on it is bound to grow rather than further decline. I think, it is investments that this country needs the most. Had Moldova had a couple of good investment projects worth 100 or 200 million dollars, it would have impacted in an effective way on the living standards of the population. 200 million dollars does not make a big difference in Ukraine or Russia. Yet, for Moldova, this is a large amount. Moldova may become very attractive for investors, having become a hub between the East and the West. There are a lot of talented people here, there is also free trade opportunities with FSU countries and Romania. That all bode well for investments. Yet, the political situation in Moldova is not very good, being an area of concern for prospective investors. The business environment also could not be described as favorable. Too much regulation, licensing requirements. Lack of consistency in legal issues. There are problems with the country's governance. Reforms and growth require co-operation between Parliament and Government. External financing is not the point. Moldova needs a consensus on the policy it wants to pursue. The Fund can help out but it is all up to Moldova.