|Yesterday in Singapore, the Annual Meetings of the Board of
Directors of the International Monetary Fund and World Bank has come to the
end. At the meeting attended 16 thousand participants from 184 countries
members of the IMF. The event
couldn’t pass without the public action of the anti-globalists, who protest
against predatory policy of the big states, against economic globalization,
which sharpens even deeper the precipice between rich and poor countries.
Nevertheless, one of the main issues discussed at the forum was the global
misbalance, when some countries start to develop rapidly and other barely
survive. "The world in a difficult situation", – this is what IMF thinks
about the world. That’s why at the meetings was presented the medium term
strategy of the IMF, meant to strengthen IMF’s activity in conditions of a
accelerated globalization. Just before the Annual Meetings started, we met
the IMF resident representative in Moldova, Johan Mathisen, to discuss the
role IMF plays in relations with our country.
- Mr. Mathisen, how important can be the decisions made by this
representative forum for such a small country as Moldova is?
- As a rule, each IMF member state has a governor and an alternative
governor. At this high-level Forum Moldova is represented by Mr. Talmaci, he
is not only the Governor of the National Bank of Moldova, but also IMF
Governor. He has a voice and representation in the Board. On the forum’s
agenda there are certain issues, the governors are supposed to vote for,
usually concerning the IMF’s future activity. Much attention would be given
to the IMF, it’s activity and relationship with the rest of the world. There
are two issues that got the most attention, but in my opinion the most
important one is the reestablishment of quotas in IMF. These quotas have
many functions, but one of them is actually deciding individual countries
votes. The quota determines the voting power in decision-making process. It
is proposed to increase the quotas of four countries, which play much more
important role in the Fund than they did at the initial stage. These are
China, Korea, Turkey, Mexico. The next step would be to reassess the quotas
for all the countries and this process may take two years. The problem is
that the quotas in IMF haven’t changed much since its foundation in 1946. Since
then, a lot of time has passed and the economic situation of the countries
changed, that’s why IMF wants to keep pace with time and modernizations. The
second issue discussed at the forum is the implementation of the strategic
plan, proposed by the IMF Executive Board. This has to do with surveillance.
- This year, IMF changed it’s position in relations with Moldova
sharply enough. Assisting Moldova –is this a result of effective reforms
that took place in the country or, for instance the result of the new
liquidities appeared after the pre-term debt reimbursement of some big
countries, including Russia? Or, there are other reasons?
- There where two instigating factors that made IMF reengage with
Moldova. One was that over the last 12-18 months before the Memorandum
signing in May, Moldovan authorities have proved to be capable to maintain
stability in the country. First of all by improving the fiscal situation,
but also by bringing down inflation through implementing sound monetary
policy. The other main factor was the reintegration of the structural
reforms. Basically, these changes took place as a result of the EU-Moldova
Action Plan, and also EGPRS. This clearly indicated that Moldova was moving
in the right direction and that it has the necessary instruments to carry
the reforms on. Signing the Memorandum is a result of the IMF’s desire to
support the country in this very positive moments and not to lose the
chance, and beside this to ensure the sustainable growth.
- For many people in Moldova the IMF’s position is still unclear,
because they don’t see the authorities’ role to strengthening the economic
situation in the country. The experts consider that the economic growth is a
result of the general growth in the region and is sustained by the people
who work abroad. At the same time, many claims IMF had to Moldova by now:
protectionism, lack of fair competition on the market, consumption character
of the economy –continue to exist.
- Our engagement with Moldovan is trying to reach an overall objective –
to gradually move away the economy from the consumption growth base financed
from remittances to the one based on investments, both domestic and foreign. In this sense we rely on the
system approach. The most important – we assist the Government in
maintaining the macroeconomic health, because the first thing investors take
into account is the macroeconomic stability, which is also very important
for inflation decrease and reducing the interest rates for credits. The
second task – improving the investment environment. Here is crucial to
determine the Government’s role, because government is the one to carry on
the basic work in this direction. Certainly, it’s very important for you to
know that we have good signs already. At least, we were very glad to hear
the Government started the privatization process again, which in part, means
the intention to privatize “Banca de Economii”. And of course, it would be
very useful that a big foreign bank would come to the country. This
will contribute to attracting clients from abroad, and in this way direct
investments, because the client will know about the bank’s liquidity and
will come by himself in the country.
- What does the Program between Moldova and IMF envisage?
- If speaking about elements from the program, then IMF is focused on
three of them. First of all is to assist the state in implementing the best
International practices, one of which is to have a stable and independent
central bank running the monetary policy. As you may know we had the key
conditionality in this area. We consider, the task of the National Bank be
to ensure price stability. Beside this, the vicious practice to finance the
government from the NBM resources should be prohibited. But this is an
Second area– the fiscal; or public finance management. We
contribute to the improvement of the taxation system, to reduce the burden
of comply with existing tax regulations. Moreover, in Moldova a World Bank project is implemented in
order to strengthen the public finance management, which also has it’s
The third side – the work with the state enterprises,
which is a lot broader than privatization. The state has to manage its
property-assets more efficiently. For this particular reason, it’s necessary
to develop a new accounting and audit system, according to which, the key
state enterprises should submit to the Parliament their annual financial
- There is a question, asked very often recently in Chisinau: “What is
the sense in getting credits from the IMF, and then to freezing these money
in reserves, instead of using them for economic development?”
- Let’s start from the fact that IMF is a monetary organization, the main
purpose of which is to ensure the monetary stability at the global scale. We
have to be sure that the global monetary network works well, that our
members have enough reserves to accomplish their external obligations. The
reserves are replenished form the account that the central bank either
purchases currency, or borrows it. If the country doesn’t have enough
international reserves and if it’s not capable to fulfill its external
obligations, than a financial crisis may occur, like it happened in Russia
in 1998 and in Asia as well. We try to assist the member-states that face a
imbalance in their balance of payments. Instead of introducing any kind of
commercial restrictions, the countries can make use of the IMF crediting. In
many cases, Moldova like any other country has a balance of payments needs.
The resources Moldova gets from the Fund go directly to the National Bank
and form of the International reserves. These money are not meant for
investing in country's economy, they are used in critical situations
for supporting the global monetary stability. In this case, we speak only about
the international reserves, they have no connection with the money the
budget is formed from.
- You said, the NBM reserves are used only in critical situations.
Isn’t it a critical case, the Russian ban on Moldovan wine, when we need to
use the reserves for supporting the economy?
- I’d like to explain one more time how the system is working. For
building foreign reserves the NBM purchases currency which comes in the
country from export. If the export drops rapidly, in the country come in
less foreign currency resources, and the importers, in this case, are not
able to purchase foreign currency from the market, and a shock may occur.
The central bank can compensate these loses from the currency reserves.
Basically, this is what the reserves are meant for – to avoid sudden fall of
the exchange rate. If there is a shortage of foreign currency on the market,
then the central bank draws this resources and places them on the market. In
this way, it helps to balance the international trade. This money do not go
directly into the branches of the economy. They are used only on the external currency
market, in order to maintain the exchange rate at the a stable level.
- One of the tasks IMF has, is the policy of debt relieve of the small
countries. And at the same time IMF grants credits. Where is the “ceiling”
for receiving credits, and not only credits from IMF? Where is that border
when the country is not able to accomplish it’s obligations? How much from
it’s debt can Moldova repay?
- There is a long term analysis. In this case we take into account two
key indicators. First – solvency risk. We look at the total external debt
and compare it with total export. The ceiling is 150 percent from current
debt to export. The second indicator – this is the liquidity risk. If
specking of the debt obligations of Moldova, then a more accurate report on
this question will give the December IMF mission, because every year we
update this data. The previous analysis showed that Moldova has no problem
in this sphere (see
chapter on Debt Sustainability Analysis).
- The prime Minister, Vasile Tarlev, declared after signing the
Memorandum with IMF, that Moldovan Government elaborated together with the
Fund “a range of measures, that will ensure us from prospective shocks”.
What kind of measures did he mean?
- This is ongoing discussions we have with the authorities. It’s clear
that the lost of export revenues and higher energy prices is appearing to be
shock in terms of trade. These loses should be offset some how. We are
making clear adjustments to the Program. It also means to make changes in
the fiscal and monetary policy, which should be tightened further. Since a big
share from the export revenues are lost – of course we need to borrow for
replenishing the loses. In the next month, in Moldova will work an IMF
mission, which will continue the discussions regarding the package of
- Will then be known the precise prognosis of IMF for inflation, GDP
and other indicators?
- Especially the December mission will review the macroeconomic
indicators jointly with the Government. We expect already corrections on the
inflation prognosis, after the July mission makes its conclusions. It’s
evident that some indicators will be less than we predicted in the previous
- How do you evaluate the new economic policy of the government,
presented the last week?
- Positively. The proposed strategy fits our common approach, it allows
the shift from the consumption principle, realized until now, to the
- Does it mean IMF is fully satisfied with Moldovan Government’s
- The way the authorities behaved during the Memorandum preparations and
also while signing the Program – is one of the best examples I saw in other
countries. In general it’s a very good approach, it contributes to keeping
the same positive economic tendencies. Regarding the program
accomplishments, until now it’s going in a good pace. That’s why we are
satisfied with the Government’s performances. And, looking ahead, we remain