27 September 2006
JOHAN MATHISEN: INTERVIEW TO CAPITAL MARKET WEEKLY
Capital Market. A new IMF mission is coming to Moldova soon. What would be the
subjects on the agenda of the next mission to Moldova?
Johan Mathisen. The main task of the IMF mission, that will visit Chişinău on
October 11-25, is to take stock of the past performance of the Government and
outlook for 2007. We will also attempt to come to an agreement on macro
projections for 2007 and associated targets. On the structural side, we expect
that the focus of the program will continue to be on three areas: continued
financial sector reformódesigned to strengthen the NBM and reduce government
interference in the financial sector; improved fiscal managementóto be achieved
through modernizing tax administration aimed at reducing the burden to comply
with existing regulations and updating the practices relating to public financed
management and relations with the NBM; and structural reforms designed to better
define the role of the governmentís in the economy, clearly important here would
be the draft privatization law, as well as continuous improved management of
State enterprises, for instance the accounts of this enterprises will be
reported to Parliament , and in general reforms designed to improve the business
The gas price doubling and extensive wine crises represented shocks for the
national income, July mission concluded. Thus, we expect growth to be lower than
earlier envisaged and inflation somewhat higher than in the program. A key
objective of the October mission will be to help or to discuss with the
authorities how to best adjust or come up with the ideal macroeconomic framework
in the face of these macroeconomic shocks. Wine ban, gas prices,
Romania/Bulgaria joining EU, implies that we all have to do more: the
international community, the IMF as well as the government. On our part, would
be a considering to increase the size of our loan, in order to ensure macro
economic stability in the country.
C.M. What should be the policies on the site of Government that will help
the country overcome these macroeconomic difficulties?
J.M. Itís a question of financing and reducing the aggregate demand
correspondingly. Either we get external resources that can help overset it, or
to adjust fiscal and monetary policies. What we are looking to find here is a
combination between higher external financing and tighter monetary and fiscal
policies. All these policies should bring the macroeconomic stability, in other
words, stable inflation and exchange rate.
C.M. What was the reaction of the Government to these recommendations?
J.M. We consider our recommendations be the best international practices to
handle these kind of shocks. In this regard, itís important to bear in mind that
Moldova has the highest inflation in the region, and I think the Government
agrees with us that inflation should be reduced at the single digit level,
because it has implications when it comes to poverty reduction, itís
substantially a ďtax on the poorĒ. Clearly, the design of the policies would
have to help achieve the inflation target.
C.M. Last IMF statements were very positive and supportive for Moldovan
government, aren't you afraid that if this recommendation would not be
fulfilled, the relations between IMF and Moldovan Government would again
J.M. From my personal experience I can assert that I have seen a clear will
on the Governmentís side to not only put in place this Program but also to keep
it on-track. I worked in PRGF supporting projects for almost a decade, and itís
clearly the way itís structured or organized itís the best I personally seen.
The government team has taken the challenge to continue to draft the program,
which is a good sign that clearly shows of course a strong will to not only
design the best program in their view but also keep it on - track.
Looking ahead, we are convinced that our relations will continue to deepen and
develop appropriately. We may have minor differences of view from time to time:
that's normal in a relationship like this. What is important is the Moldovan
authorities' commitment to economic reforms that could position Moldova to take
advantage of deeper integration in European institutions, and as long as
Moldova's authorities remain committed to harmonization of institutions with
best European and international best practice, we believe the relations with the
Fund will be excellent.