Republic of Moldova and the IMF
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Poverty Reduction Strategy Paper
Preparation Status Report
Chisinau, April 24, 2002
1. It has been over a year since Moldova's Interim Poverty Reduction Strategy Paper (I-PRSP) was finalized. At that time, it was envisaged that the preparation of a full PRSP would be completed towards the end of 2001, although it was recognized that this was an ambitious schedule. Shortly following the adoption of the I-PRSP, however, the preparatory process came to a standstill because of unforeseen political events. These events were set in motion in mid-2000, when the Moldovan Parliament adopted a major change in the country's constitution, changing Moldova from a presidential republic into a parliamentary republic. In December 2000, Parliament failed to elect a new President and, as a result, Parliament was dissolved and general elections were held in February 2001. These elections resulted in an absolute majority of the Communist Party of Moldova and the subsequent election of a new President and Government. The elections, the change in government, and the associated change in senior government officials, caused the PRSP process to temporarily stall. Although this was unfortunate, it was also unavoidable, and the result of a healthy democratic process.
2. An additional challenge was posed by the interruption of Moldova's relations with the international donor community because of the political uncertainty created by the elections and the change in government. The new Government has had to overcome an initial reluctance from the international community to offer support. Furthermore, Government needs to demonstrate its commitment to structural reforms toward a free market economy by implementing and advancing the reform measures. We believe that our Government, more than any previous government of Moldova, has had to prove itself in terms of policies and commitment to complete the transformation to a market economy. As a result, financial assistance (including for the PRSP process) has been considerably less than hoped for, while the need to reestablish relations with donors has required considerable time and effort of senior government officials.
II. Recent Poverty Alleviation Efforts
3. While the process of developing a full PRSP was delayed, the Government's policy priorities since its installation have been very much attuned to the objective of alleviating poverty. The Government's efforts focused on three areas, consistent with the ideas outlined in the I-PRSP:
4. Parallel to the above effort, this Government has confirmed its commitment to the PRSP process by updating the I-PRSP. The document was approved by the Coordinating Committee chaired by the President and subsequently by the Government on April 21, 2002. The updated I-PRSP reflects new poverty monitoring data, an updated macroeconomic framework, a new institutional arrangement for PRSP, and a revised timetable for developing a full PRSP. The new poverty monitoring data introduces additional poverty indicators. A new institutional arrangement for PRSP process includes civil society organizations, external development partners, the private sector, and the poor in the participatory process. Recognizing that a quality participatory process requires strong capacity, additional time and financial resources to organize participation, we proposed to extend the timetable for completion of a full PRSP to March 2003 (Attachment 1).
5. At the same time, the Government has put much of its time and energy in trying to solve the Transnistrian conflict, in cooperation with the international community. This conflict has been a heavy burden for Moldova, both emotionally and economically. The re-integration of Transnistria would allow us to direct all our efforts toward the development of our country and the alleviation of poverty. Furthermore, the Government has recently spent a lot of time and effort to address domestic disputes as regards to language, national identity, and cultural inheritance in order to find acceptable solutions to all parties involved.
III. The Road Ahead: Constraints and Challenges
6. In August 2001, the Government restarted the PRSP preparation process. A Coordinating Council was established, chaired by the President and consisting of senior Government members, as well as non-government members, to organize and implement the development of the full PRSP (see the attached Figure). Following this, a new Technical Committee was set up, headed by the Deputy Minister of Economy, responsible for organizing sectoral working groups within the government. The task of organizing civil society participation has been assigned to a Council of Experts, which includes representatives of organizations outside the government.
7. The preparation of a full PRSP, including a broad participatory process, is a first-time exercise for Moldova. In carrying out this exercise, the Government is facing a number of difficulties and constraints:
8. In light of these difficulties, it seems clear that, even without the change in government, the original time schedule for the preparation of the PRSP was too ambitious. To overcome these difficulties, the Government will be seeking assistance from the international donor community in the following areas:
IV. Preparation of the PRSP: A Time Frame
9. The attached table provides a time frame and outlines the various steps for the preparation of the full PRSP. The first phase, identifying the mechanism for managing the process has already been proposed and adopted by the Government. Clarifying the role and responsibility of all parties involved and strengthening of the institutional mechanism are being worked out with the assistance of the World Bank, in particular to ensure that all segments of society, and especially the poor, are well represented and participating in the process of developing a full PRSP. The next step, which is currently underway, is aimed at providing the informational basis for poverty reduction measures, assessing their impact and monitoring. With assistance of the World Bank, the Government established a poverty analysis working group under the Technical Committee to prepare a three-year action plan with the objective to improve poverty monitoring data, dissemination, and inter-ministerial coordination. The action plan, consistent with the World Bank recommendations, was approved by the Government on May 15, 2002 (GD No 619 of May 16, 2002).
10. Parallel with this, we will link the PRSP to a medium-term expenditure framework to ensure strategic prioritization and financial viability of the proposed poverty reduction strategy. We will aim at having PRSP sector strategies ready by the beginning of August 2002 and integrated the strategies into a full PRSP by November 2002. We expect to finalize a linkage between the PRSP and the 2003-05 Budget towards March 2003.