After completing its visit to Chișinău the head of the International Monetary Fund (IMF) Rubén Atoyan stated that Moldova will receive $20 million within the IMF program launched in 2016. And although most of the program’s objectives were achieved, Moldova has to tackle significant governance and institutional vulnerabilities which are major impediments to boosting the living standards in the country. 

The IMF mission visited Chișinău from January 22 to February 5 to conduct the final review of Moldova’s economic program supported by the IMF’s Extended Credit Facility and Extended Fund Facility arrangements.

At the end of his visit, Atoyan stated that the Government is committed to implementing the necessary reforms. Atoyan mentioned that Moldova – IMF Program, which will be concluded on March 20, 2020, was successful, and most of its objectives were achieved. 

Comprehensive reforms have rehabilitated the banking system and strengthened financial sector governance, entrenching macro-financial stability. This progress is commendable given a volatile political landscape, with the course of the program stretching over tenures of three different governments. 

Reforms under the program helped improve confidence and supported a turnaround in the economy. 

Atoyan mentioned that it is important to develop and modernize the infrastructure, pointing out significant weaknesses the government faces in managing the public investments. 

It is also crucial to secure financing from external development partners, and in the event that external inflows fall short of expectations, the government should have contingency plans.  

Prime Minister Ion Chicu declared that Moldova plans to conclude a new program with the IMF. Chicu mentions that the government and IMF agreed upon new actions and policies that will be in the state’s interest. He claimed that the government made no commitment to increase the taxes, adding that he will request a news mission to come in order to prepare a new IMF program. 

The government and the IMF staff discussed certain objectives that will be realized, amongst which is approving the legislation on the non-banking financial institutions, in order to ensure sustainable and secure development of the sector. 

The two parts also discussed the financial losses accumulated by the National Agency on Energy Regulation, for which a compensation measure needs to be adopted.

The Government and the IMF mission discussed the need to focus on a sustainable, balanced and more inclusive economic growth objective. Both parts agreed it’s important to improve the business climate and investment facilities. Subsequently, the government needs to focus on reforming education, health protection, and social policy systems, which will help to combat migration, change the demographic tendencies and increase the welfare of Moldovan society. 

Despite successful stabilization efforts, widespread and significant governance and institutional vulnerabilities are major impediments to boosting the living standards of Moldovan people. Perceptions of corruption and weak rule of law are entrenched, the regulatory framework is not properly enforced, informality is high, and a large state-owned-enterprise sector poses fiscal risks and undermines competition and productivity. 

While significant progress has been made on banking sector supervision, weak oversight of the non-bank financial sector and lack of progress on asset recovery are a recurring source of concern. Addressing these vulnerabilities could have significant growth dividends through faster capital accumulation, reduced labor and human capital headwinds from extensive emigration, and higher productivity.

Previously, an IMF mission led by Ruben Atoyan paid an official visit to Chișinău in October 2019. 

In November 2016, Moldovan authorities approved a three-year program with IMF’s support, financed through $182 million.

Two-thirds of the credit is provided through the Extended Credit Facility, which has a zero interest rate until the end of 2018, a grace period of five and a half years and a ten-year reimbursement term. 

The rest of the amount is provided through the Extended Fund Facility, with an annual interest rate of over one percent, a ten-year reimbursement term and a grace period of four and a half years.