IMF Resident Representative in
Moldova, Volodymyr TULIN, answered the questions from the
journalist of the "Economic Review" (Logos-Press) Alexander
On April 17, 2020, IMF Executive Board
approved emergency assistance to Moldova in the amount of $235
million to combat the COVID-19 pandemic. Already this week, the
entire amount was transferred to the Treasury account. The IMF
provided this loan without the traditional Memorandum. That is,
without setting out the commitments to be undertaken by the
authorities, as well as without setting prior actions and
structural benchmarks to be achieved. This time, the IMF was
fine with the “Letter of Intent”, which briefly summarized, on
two pages, the intentions of the authorities of the borrowing
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LP: Mr. Tulin, which statements
from the “Letter of Intent” of the authorities of Moldova are
considered by IMF representatives as essential ones? What
provisions you pay a special attention to and are going to
Let me point out, first, that IMF
financing is intended to facilitate strong and comprehensive
policy response to slow the spread of the virus and mitigate the
immediate economic and social impact. This is a substance of
this financing instrument. Hence, putting forward a quick and
well-rounded policy package was absolutely key. Here I mean
enhanced health system support, social protection and business
support measures, underpinned by a pragmatic adjustment of the
state budget and financial stability management – all these are
integral components of the package.
Also, I want to tell you that commitment to
ensuring strong accountability and transparency was of outmost
importance to credibility of the authorities’ financial
assistance request. This obligation entails enforcement of the
AML framework and asset declaration regime and publishing
procurement and contracts beneficiary information. By the way,
all crisis-mitigation spending will be subject to a dedicated
audit by the Court of Accounts which will have to be made
public. To quote our Managing Director Kristalina Georgieva
“spend what you can, but keep the receipts”.
Should the investment projects prepared
with the support of the public sector be postponed during the
crisis? Do IMF experts have a common view on this? What are the
pros and cons in such cases?
First of all, the recession the global
economy has now entered is frightening not only in terms of its
possibly unprecedented magnitude, but also in term of its
unusually unpredictable nature. We simply don’t know how long it
will take to contain the spread of the virus until we have an
effective treatment or a vaccine. The current assumption of a
gradual normalization starting mid-year was factored into our
economic forecasts. And policy formulation is also based on such
But all this is subject to sizable
downside risks. While policy response is evolving rapidly, we
see as paramount authorities’ conscious commitment to implement,
if needed, additional measures to preserve macroeconomic and
social stability, including by reviewing and adjusting spending
plans. Obviously, under such circumstances, the priority of
anti-crisis measures is higher than of long term programs, and
this to some extent refers to capital investments also.
Second, policies with respect to both
crisis management and facilitating the recovery need to be
attuned to the unique, very specific, nature of this shock.
Unlike the recent crises, which were generally financial in
origin, this crisis has hammered the real economy. Therefore,
the immediate concern is to reduce the knock-on risks of
wide-spread balance sheet impairment and avoid a spread to the
From past crises we know that when
balance sheets are affected in a material way, then the
post-crisis recovery tends to be much slower and protracted. In
practical terms, this calls for supporting incomes and liquidity
of households and enterprises, because it will help facilitate
an early recovery once the medical emergency has been overcome.
Given Moldova’s sustainable public debt
level, we see the widening of the fiscal deficit as appropriate,
with focus in terms of facilitating the recovery on protecting
households by means of strengthened unemployment schemes and
direct income support.
This thinking also calls for measures to
support viable businesses, potentially via well-targeted loan
guarantees, while steering clear of socializing preexisting
losses or compromising on financial sector prudential framework.
There is no doubt, that to achieve an
economic growth and higher living standards, Moldova needs to
build roads and bridges. But to sustainably finance public
investment and growth in the future, what is needed today is not
to shy away from preserving the taxpayer revenue base.
- The authorities of Moldova in the “Letter
of Intent” committed not to introduce or intensify exchange and
trade restrictions and other measures or policies that would
compound balance of payments difficulties. Mr. Tulin, how would
you comment this?
Actually, this commitment boils down to
Moldova respecting its legal obligations as a member of the IMF.
The specific language refers primarily to Article VIII of IMF’s
Articles of Agreements, prescribing general obligations such as
avoiding discriminatory currency practices or restrictions on
making of payments and transfers for current international
transactions. There is also an obligation to provide the Fund
timely reliable economic data, as well as to consult with the
IMF on planned and ongoing policy measures.
Two of the main purposes of the IMF, as
stated in its Articles of Agreement, are to facilitate the
expansion and balanced growth of international trade, and
thereby to contribute to the promotion and maintenance of high
levels of employment and real income; and to assist in the
establishment of a multilateral system of payments in respect of
current transactions between IMF members. By having accepted
the obligations of Article VIII, Moldova gives confidence to the
international community that it will pursue sound economic
policies that will obviate the need to use restrictions on the
making of payments and transfers for current international
transactions, and thereby contribute to a multilateral payments
system free of restrictions.
LP: - Every
time Moldova receives an IMF loan, along with positive
statements we also hear skeptical and even critical statements.
Critics usually talk about the "IMF's anti-social nature and
dictatorship". What can you answer them, especially in the light
of this loan agreement?
While, indeed, one of the most often
repeated criticisms of the IMF is that the economic reform
programs it supports restrict social spending by governments,
the numbers usually paint a different picture. Studies tend to
reveal positive effects of IMF-supported programs on health and
education expenditures, with positive effect more pronounced in
developing countries. More so, protecting priority social
assistance has become a common element of IMF program
conditionality. The recently concluded Moldova’s three-year
program had a specific indicator targeting the minimal social
spending of the government, warranting that it is not subject to
cuts or redistribution.
With regard to the COVID19 crisis, the Fund
is also stepping up with exceptional action. We have already
received over one hundred requests from our member countries for
emergency financing, and few dozen of them, Moldova including,
have already been approved. The reality is that this is
everybody’s fight and victory is indispensable in every single
Our global policy agenda has also been
reshaped. The first and foremost priority, as we see it, is
protecting lives. Every country needs a healthy population to
have a healthy economy. This is an axiom. We see merits in
supporting essential containment measures to arrest the spread
of the virus and prioritizing health spending.
Second priority is protecting
livelihoods. Liquidity pressures, such for households and
business on lockdown, need to be prevented from becoming
solvency problems. This means creating financial lifelines to
affected households and businesses, with indispensable role for
monetary stimulus and liquidity provision.
Third priority is planning for the
recovery with today’s policy action focused on reducing
irreversible economic scarring, such as protracted unemployment,
poverty, and inequality.
- What are the prospects for continuing the
collaboration between the IMF and the Republic of Moldova after
the completion of the crisis associated with COVID-19?
IMF always stands ready to help Moldova
address its immediate and medium-term policy challenges. At this
moment our engagement is focused on COVID19 crisis response.
That said, we also stand ready to support reforms via our more
usual lending arrangements. Prior to the pandemic, the
authorities had officially requested to initiate negotiations of
a full-fledged governance-focused multi-year arrangement with
the Fund that would build on the progress of the recently
concluded program. So, we do see good perspectives here.