IMF rules to immediately disburse 175 million dollars to Moldova

Chisinau, 29 June /MOLDPRES/ - The Executive Board of the International Monetary Fund (IMF) has ruled to immediately disburse a sum of 175.2 million dollars to Moldova. The money will be used for financially backing the country’s budget. IMF finds out that the Programme with Moldova was carried out, in general, according to the agreed upon parameters, despite the difficult circumstances. The authorities must maintain the strong pace of the reforms, as this is an essential factor for the promotion of Moldova’s prosperity.        

The IMF’s Board of Directors finished the fifth evaluation of the programme with Moldova, supported through the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF)[1] and the first evaluation of the programme backed by the Resilience and Sustainability Facility (RSF) [2].    

Thus, Moldova got immediate access to the disbursement of 133 million Special Drawing Rights (SDR) - about 175.2 million dollars in all; this sum will be used for budgetary support. The overall sum of the disbursements made within the current programmes will represent about 636.5 million dollars.    

IMF ascertains a smaller economic growth than anticipated, as Moldova’s economy is hit by Russia’s war waged against Ukraine.

„The economy grew by 0.7 per cent in 2023 and the economic improvement is scheduled to continue, though in a weaker pace than the earlier forecast one. The budgetary and fiscal policy stays focused on the protection of the most vulnerable groups of the population and on supporting the economy. Although a relatively good economic growth is forecast for medium term, the short-term risks stay high and the situation might event worsen,’’ the IMF’s press release reads.    

The IMF deputy director, head of the meeting Kenji Okamura said that the programme with Moldova was carried out according to the agreed upon parameters, despite the difficult circumstances. The official recommended that the Moldovan authorities maintain the strong pace of the reforms, as this is an essential factor for the promotion of Moldova’s prosperity.  

“The programme with Moldova, backed by ECF and EFF financing facilities, is carried out, in general, in line with the parameters agreed upon, although delays are recorded in the carrying out of the structural reforms. Although the economic improvement following the multiple shocks was slower than anticipated, with a smaller economic growth in 2023 and more modest in 2024, in October last year, the inflation remained in the interval targeted by the National Bank of Moldova (BNM), while the medium-term economic growth will be, according to the forecast, relatively strong. Taking into account that the risks stay high and the situation is likely to worsen, the authorities must focus, in continuation, on the consolidation of the plans for unforeseen situations and on the maintaining of agile policies, on the consolidation of the energy security and on the promotion of the reforms friendly for economic growth – a process backed by the goal of joining EU,’’ the IMF official said.         

According to IMF, the budgetary and fiscal policy of Moldova should stay focused on the protection of the most vulnerable categories of the population and on backing the economy. At the same time, the gradual budgetary consolidation is needed, in order to accumulate reserves and maintain the sustainability of the state debt, especially taking into account the planned decrease of the volume of financing from medium-term foreign sources.     

With the limiting of the impact of the inflationist pressures, the monetary policy should pursue a gradual normalization of the still high level of minimal compulsory reserves, which will support the domestic demand. Given the uncertain environment, the basic rate must be maintained at the present level. The authorities’ commitment to maintain the prudential requirements as to the banks’ shareholders is welcome and plays an important role in the protection of the macro-financial stability.      

Additional reforms are necessary for the consolidation of the governance, ensuring the autonomy, transparency and responsibility of BNM. The authorities must continue closely cooperating with IMF experts, in order to carry out, in due time, the measures identified following the diagnose exercise recently carried out by BNM. These reforms are essential, in order to ensure the reliability of the monetary policy and the macro-financial stability.     

Continuous progress is needed in the fields of the anticorruption reforms, in order to enhance even more the confidence in the institutions from Moldova and to promote the social and economic development. The adoption of the law, through which the anticorruption court will be set up, would be a step in the direction necessary. The authorities will have to ensure the functionality of the new court quickly and efficiently.     

Positive results have been achieved within programme backed by the Resilience and Sustainability Facility, with all reforms being carried out successfully, according to the conditions established for the first programme evaluation. The authorities should maintain this sustained pace of reforms, which is essential for strengthening Moldova’s resilience to the climate changes.     

The Extended Credit Facility provides financial assistance in a more flexible form and better adjusted to the varied needs of the low-income states, including during crises (for instance, in the case of the lasting problems related to the balance of payments). The Extended Fund Facility provides assistance to the states with big imbalances in the balance of payments, which is due to the structural barriers or the slow pace of economic growth  and of a an inherent precarious state of the balance of payments. The programme of 40 months, concluded with Moldova, backed through ECF and EFF, was approved in December 2021 (see the press release) and adjusted in May 2022, with an increase of the overall financing up to 594.26 million SDR.      

The Resilience and Sustainability Facility provides long-term financing  for the consolidation of  the economic resilience and sustainability through (I) backing the reforms of policies which reduce the risks with strong impact at the macroeconomic level, related to the climate changes and preparing for pandemics and (II) extension of the area for the promotion of the policies related and increase of the financial reserves, thus contributing to the attenuation of the risks coming from such long-term structural challenges. The programme supported by the Resilience and Sustainability Facility was approved in December 2023.