IMF Perspective on Recent Economic Developments in Moldova >>>

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30 September, 2010 - 03:00


Tokhir Mirzoev

IMF Resident Representative in the Republic of Moldova

PRESS STATEMENT

IMF Perspective on Recent Economic Developments in Moldova

Tokhir Mirzoev, Resident Representative of the International Monetary Fund (IMF) in Moldova issued the following statement today in Chisinau:

“Moldova’s economy is gradually recovering from the recession. Recent indicators point to healthy economic growth in the first half of the year; budget execution has been strong; and the policies of the National Bank of Moldova have contained inflation pressures and contributed to the stabilization in the banking sector.

“The authorities’ IMF-supported program remains on track. The amended 2010 budget approved by the government this week has reallocated certain line item expenditures mainly due to pressures posed by recent shocks, notably summer floods, restrictions on selected Moldovan exports to Russia, and increased energy tariffs. Even though the implied budget deficit slightly exceeds the program target, we expect that savings emerging during budget execution would allow all fiscal indicators to be kept within the IMF-supported program framework.

“The discussions on the second review of Moldova’s program under the Extended Credit Facility/Extended Fund Facility (ECF/EFF)1 arrangements will take place soon after the parliamentary elections and formation of a new government. The timing of these discussions is dictated by the need to focus on the 2011 budget, the medium-term expenditure framework, and the authorities’ structural reform agenda for 2011 and beyond. Completion of the second program review would enable disbursement of SDR 50 million, intended to support the 2011 budget (SDR 15 million) and further augment NBM’s foreign reserves.

Background: So far, Moldova received SDR 120 million (about US$ 184 million) under its ECF/EFF arrangements with the IMF. This assistance includes SDR 80 million (US$ 123 million) in support of the 2010 budget, and SDR 40 million (US$ 61 million) to replenish NBM’s foreign exchange reserves. In addition, the authorities have used SDR 114.3 million (about US$ 180 million), the bulk of Moldova’s share of funds distributed by the IMF to facilitate global trade and financial flows, to finance the budget deficit in 2009


1The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF carries a zero interest rate, with a grace period of 5.5 years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years. The Extended Fund Facility (EFF) carries an annual interest rate equal to the SDR basic rate of charge, and is repayable over 10 years with a 4.5-year grace period on principal payments.