## 1.      The National Development Strategy (NDS)—known as "Moldova 2020"—was

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### NDS adoption, purpose, and process
- Approved by the Parliament of the Republic of Moldova on July 11, 2012 and officially published on November 30, 2012.
- Unifies the government's poverty reduction strategy and development vision; coexists with other strategic documents such as “Re-think Moldova” and the Government Action Plan for 2011–2014 "European Integration: Freedom, Democracy, Welfare."
- Inclusive and participatory elaboration: public consultations were held and the text of the NDS has been accessible on the government's website for participation.

### Seven national development priorities (NDS)
- (1) Aligning the education system to labor market needs in order to enhance labor productivity and increase employment in the economy.
- (2) Increasing public investment in national and local road infrastructure, in order to reduce transportation costs and increase speed of access.
- (3) Reducing financing costs by increasing competition in the financial sector and developing risk management tools.
- (4) Improving the business climate, promoting competition policies, streamlining the regulatory framework and applying information technologies in public services for businesses and citizens.
- (5) Reducing energy consumption by increasing energy efficiency and using renewable energy sources.
- (6) Ensuring financial sustainability of the pension system in order to secure an appropriate rate of wage replacement.
- (7) Increasing quality and efficiency of justice and fighting corruption in order to ensure equitable access to public goods for all citizens.

### Poverty trends and shared prosperity
- National poverty rate fell from 30.2 percent in 2006 to 17.5 percent in 2011.
- Based on the Europe and Central Asia (ECA) regional poverty line of USD5/day (PPP) 94 percent of the population was poor in 2002 but this had declined to 55 percent by 2011.
- Incidence of extreme poverty (based on a USD 2.5 PPP poverty line) declined from 57 to 10 percent between 2002 and 2011.
- Both rural and urban areas saw sharp poverty reduction; poverty reduction occurred faster in urban areas.
- Consumption growth estimates for the period 2006-2011: average annual consumption growth of 3 percent overall, and an average 6 percent for the bottom 40 percent.
- Despite improvements, Moldova’s poverty rate based on the ECA regional poverty line is more than double the 25 percent ECA average; extreme poverty is significantly higher than the regional average of 6 percent.

### NDS as a mechanism for partner mobilization and past performance
- Previous National Development Strategy (2008–2011) presented to the Boards of IDA and the IMF in 2008 and was effective in mobilizing support from development partners.
- An evaluation report on implementation for 2009–2010 was prepared; no final report for the strategy period was produced.
- 2010 report noted government reforms in social assistance, democratic institutions, European integration, and relations with trade and development partners, including responses to the 2008–2009 financial crisis and 2010 floods.

### Roadmap for pro-poor economic growth: strategy and risks
- NDS argues for shifting from consumption-based growth (driven by remittances) to growth led by investment, productivity, exports, and a knowledge-based society.
- GDP growth targeted: rising gradually to almost 7 percent by 2020; achieving this requires macroeconomic stability and timely implementation of structural reforms.
- Risks identified: protracted slowdown in Europe and/or Russia could substantially impact remittances, exports, and FDI and threaten the growth outlook.
- Recommendation: provide further detail on assumptions (e.g., future remittances and labor migrations) underpinning growth projections for critical evaluation over time.

### Macroeconomic framework and stability
- Recommendation: incorporate a comprehensive macroeconomic framework in the NDS to underpin the growth strategy and emphasize macroeconomic stability.
- Noted improvements:
  - Adoption of an inflation targeting regime anchoring inflation around the 5 percent target, though inflation remains buffeted by volatile food and energy prices.
  - Tax policy and administration reforms, combined with expenditure rationalization, have brought the fiscal deficit close to a sustainable level.
  - Trade liberalization and investment have promoted exports and helped to gradually lower the current account deficit.
- Continued efforts, including further fiscal consolidation, are needed to secure gains.

### Public debt and overall debt position
- Public and publicly-guaranteed (PPG) debt has been steadily declining; as of end-2012 PPG debt stood below 30 percent of GDP.
- Staffs note room for modest borrowing for priority projects if prudent and prioritized.
- Concern: private external debt in Moldova is about 60 percent of GDP and is likely to increase over the medium term, with a rising share of short-term debt, raising vulnerability to external shocks.
- Recommendation: NDS should identify measures to improve allocation of capital expenditure and consider overall debt-servicing capacity in debt sustainability assessments.

### Financial sector development and supervision
- Broad concurrence with focus on increased financial intermediation:
  - Encourage consolidation of the deposit base by promoting a larger proportion of remittances through the banking sector and greater competition.
  - Progress noted in creating a legal framework for the non-banking financial sector and in credit reporting.
- Further needs:
  - Strengthening regulatory and supervisory functions.
  - Reforms to improve the collateral framework and ensure proper implementation by Government and National Bank of Moldova (NBM).
  - Attention to financial consumer protection, financial literacy and inclusion (largely absent in the strategy but important).
- Corporate governance and transparency:
  - Need to develop and fully enforce legal framework for enhanced shareholder transparency including Ultimate Beneficial Ownership.
  - Adhere to international corporate governance standards.
  - Consider legal reforms to strengthen NBM’s independence and reduce courts' ability to interfere.
  - Corporate financial reporting reforms (audit oversight, public registry of financial statements in the National Bureau of Statistics) require further steps.

### Business climate, trade, and firm-level competitiveness
- Support for clearer rules of the game for business to enhance investor confidence and increase investment flows, including FDI.
- Further regulatory reforms and strengthening of the rule of law are necessary.
- Areas for specific attention:
  - Trading across borders: customs administration and tax administration.
  - Competition policy and the court system as substantial barriers.
  - Greater emphasis on making it easier to close a business; this can impact competitive behavior and access to finance more than improvements in starting a business.
  - Emphasis on food safety and phytosanitary requirements to facilitate entry of agriculture and food products into the EU and other export markets.
- Company- and industry-level actions to translate environment improvements into revenue and jobs:
  - Management training, better access to market information, improved access to finance, and removal of industry-specific constraints.
  - Improve vocational and tertiary education to meet labor market needs.

### Road infrastructure: targets, affordability, and safeguards
- NDS recognizes importance of national and local road rehabilitation and maintenance for economic and social development and supports efficiency improvement in road maintenance.
- Concern: restoring eighty percent of roads by 2020 would require investment and maintenance expenditures difficult to mobilize and could displace other priority spending if fiscal sustainability is to be preserved.
- Recommendations:
  - Conduct adequate cost-benefit analysis to identify and prioritize good projects.
  - Establish adequate PPP legislation and significant public sector capacity building if private investment via PPPs is pursued.
  - Emphasize greater transparency and effective competition to prevent waste, fraud and abuse in the road sector.
- Note: opportunities for PPPs in the road sector may be limited by relatively low traffic levels on most of Moldova's roads.

### Energy sector vision and required conditions
- Staffs broadly concur with strategic vision focused on energy security and increasing energy efficiency.
- Recommendation: implement reforms and capacity building with strong attention to governance, a transparent regulatory framework, affordability, and financial sustainability.
- When these conditions are met, the energy sector should be better placed to attract needed investment capital.

### Agriculture: importance, vulnerabilities, and market requirements
- Agriculture is not among the seven priority areas but remains a mainstay:
  - Agriculture accounted for 12 percent of GDP and employed 28 percent of the labor force in 2010.
  - When combined with the agro-food sector, it represented about 50 percent of total exports.
- Challenges:
  - Output volatility due to climate hazards.
  - Low market competitiveness from distortions in input and output markets, poor quality public services (e.g., agricultural education), delays in farm restructuring, underdeveloped land markets, lack of access to finance, and unsustainable soil management.
  - Most agricultural produce, especially high value products, do not meet market rigor for safety, quality, quantity, variety, or packaging.
- Recommendation: support private sector efforts to adopt and implement EU food safety and quality standards; address market, education, finance, and land market constraints.

### Promoting human development: education, health, and pensions
- Health sector:
  - Although not a top-seven priority, continue reforms to improve efficiency, accessibility and quality of health care (including optimizing and upgrading the hospital network and reforming health financing).
- Education and skills:
  - NDS emphasizes upgrading education and skills to meet labor market requirements, enhance productivity, and increase employment.
  - Measures: modernize vocational education and continuous labor force training, enhance partnerships between education institutions and labor markets, improve quality of education, reform research and innovation system.
  - Recommendations:
    - Strengthen labor market analysis to distinguish cyclical and structural unemployment determinants.
    - Develop mechanisms to coordinate and promote innovation activities, e.g., ICT-enabled services with focus on skills.
    - Identify costs of proposed measures and set specific monitoring indicators.
    - Participation in international skills assessments such as the OECD Program for the International Assessment of Adult Competencies (PIAAC) to facilitate monitoring and policy design.
    - Improve governance and social accountability in the sector and continue optimization of the secondary school network and access to quality preschool education.
- Pensions:
  - NDS identifies equity and sustainability as the two main issues facing the pension system.
  - Causes of low and declining replacement rate: the indexation formula and non-valorization of past earnings.
  - Demographic pressures: small number of contributors compared to pensioners expected to worsen and threaten fiscal sustainability.
  - Strategy outlines parametric changes to enhance social and fiscal sustainability of the Pay-As-You-Go pension pillar.
  - Staffs argue more decisive policy reforms are required; recent developments were modest and insufficient.
  - Potential reform options:
    - Equalize retirement ages for men and women at 62 and consider further increases to reflect higher life expectancy.
    - Better link benefits and contributions for all groups, including farmers and emigrants.
    - Valorize past earnings with inflation to halt the sharp drop in replacement rate.
  - Implement reforms in a package to avoid undermining fiscal sustainability of the pension scheme.
  - Consider alleviation of old-age poverty in the broader context of social security policies and programs.
  - For fully-funded pension schemes (the “second pillar”), staffs agree a thorough evaluation of prerequisites and timeline is in order, particularly regarding the strength of the financial system.
  - Note: pension reform would also have a beneficial impact on savings mobilization and development of financial markets.

### Governance challenges and cross-cutting recommendations
- Emphasize improved governance, rule of law, transparency, and competition across sectors (financial, road, energy, business environment).
- Strengthen legal frameworks (shareholder transparency, Ultimate Beneficial Ownership, corporate governance standards) and institutional independence (e.g., NBM).
- Enhance corporate financial reporting, audit oversight, public registries, and social accountability mechanisms to improve service delivery monitoring and citizen engagement.

*International Monetary Fund staff assessment of Moldova 2020 (August 1, 2013)*

### 21.      To achieve the goals of the NDS, the Government of Moldova will need to strengthen

### Strengthening public finances and public investment management
- Synchronization of sectoral expenditure plans and program-based budget planning is welcomed by staffs.
- Staffs support the links proposed between the NDS, sectoral strategies and MTBF.
- Unpredictability of resources for multi-year investment projects has reduced credibility of the budget and could limit the ability of Moldova to achieve NDS goals.
- Recommended areas to strengthen:
  - budget reform
  - public investment management
  - internal audit
  - management control
  - expenditure management (including cash planning)

### Improving efficiency and effectiveness of public service delivery; building capacity in central and local public administration
- The NDS could benefit from an increased focus on improving efficiency and effectiveness of public service delivery, and building capacity in central and local public administration.
- Suggested priorities and sequencing for service delivery improvements:
  - re-engineering and streamlining of procedures
  - integration of services
  - smart regulation
  - data warehouse and data centers services to streamline access to data
  - centralized registries with quality data, open data and remote access
  - uniform procedures for services delivered by municipalities
- Increasing capacity at central and local levels to evaluate, set, implement and manage policy priorities is essential.

### Justice sector reform
- Staffs share concerns about dysfunction in the justice system as identified by the NDS and fully agree that improvement of the judiciary should be a priority.
- Critical success factors:
  - strong political will and forceful actions
  - implementation of the specific objectives outlined in the Strategy
  - emphasis on judicial awareness in the population
  - involvement of young representatives of the judicial profession
- Fiscal caution: avoid committing unaffordable amounts of scarce budgetary resources to the sector (example cited: raising the wages of judges and prosecutors several times, as currently proposed).
- Monitoring indicators and targets could be improved (example suggested: use experiential surveys with people who had recently an actual experience with the courts [court user surveys] instead of relying only on perception surveys as is currently proposed).

### Targets, indicators, monitoring and evaluation
- The NDS establishes an integrated framework for implementation, monitoring and evaluation that:
  - ensures coherence between various national and strategic planning documents
  - coordinates implementation and monitoring of the strategy between ministerial subdivisions
  - establishes an efficient process for reviewing the strategy periodically
- Staffs welcome plan to integrate NDS implementation in the fiscal process and ensure consistency of NDS financing needs with budget planning.
- An annual Action Plan to cost and operationalize NDS goals could help better integrate policy objectives into the medium-term expenditure framework.
- Staffs welcome plans to maintain extensive consultations with civil society and other stakeholders and commend retention of the National Participation Council (includes representatives of various NGOs, private sector, and trade union stakeholders).

### Conclusion and implementation risks
- Bank and Fund staffs believe the NDS provides a good basis for inclusive growth in Moldova, but that implementation will be key.
- The focus on pro-poor economic growth (through private sector development and improved infrastructure), human development and governance is appropriate given Moldova’s current situation.
- Consolidation into one document of priorities should enable efficient monitoring and coordination among development partners.
- Particular attention needed to the relation between the NDS and existing national and sectoral strategies, and how they will inform the Medium-Term Budgetary Framework and annual Budget Laws.
- Implementation risks to be actively managed:
  - external terms of trade shocks
  - weakness in implementation capacity
  - the political cycle

### Staffs’ recommended priority areas for implementing and strengthening the NDS
- Monitoring and evaluation:
  - strengthen the monitoring framework and capacity of key line ministries to develop and implement annual action plans
  - integrate these actions into the medium-term expenditure framework
- Public Administration Reform:
  - place greater emphasis on civil service management reforms
- Business environment:
  - improve corporate governance in the financial sector and the broader economy, particularly in light of recent ownership disputes in the banking sector
  - reforms in the justice sector are essential to protect investors and foster investment
- Physical infrastructure development:
  - priority investment areas: energy, telecommunications, transportation, water, and sanitation infrastructure
  - consider private sector partnerships
- Human resource development:
  - ensure the educational system is aligned with European standards and responsive to labor market needs
  - improve incentives to health care providers to both improve efficiency and deliver quality health services, critical to meet the MDGs

* _cr13270 - 21.      To achieve the goals of the NDS, the Government of Moldova will need to strengthen*

### 1.      The National Development Strategy (NDS)—known as "Moldova 2020"—was

### _cr13270 - 1.      The National Development Strategy (NDS)—known as "Moldova 2020"—was

### NDS adoption, purpose, and process
- Approved by the Parliament of the Republic of Moldova on July 11, 2012 and officially published on November 30, 2012.
- Unifies the government's poverty reduction strategy and development vision; coexists with other strategic documents such as “Re-think Moldova” and the Government Action Plan for 2011–2014 "European Integration: Freedom, Democracy, Welfare."
- Inclusive and participatory elaboration: public consultations were held and the text of the NDS has been accessible on the government's website for participation.

### Seven national development priorities (NDS)
- (1) Aligning the education system to labor market needs in order to enhance labor productivity and increase employment in the economy.
- (2) Increasing public investment in national and local road infrastructure, in order to reduce transportation costs and increase speed of access.
- (3) Reducing financing costs by increasing competition in the financial sector and developing risk management tools.
- (4) Improving the business climate, promoting competition policies, streamlining the regulatory framework and applying information technologies in public services for businesses and citizens.
- (5) Reducing energy consumption by increasing energy efficiency and using renewable energy sources.
- (6) Ensuring financial sustainability of the pension system in order to secure an appropriate rate of wage replacement.
- (7) Increasing quality and efficiency of justice and fighting corruption in order to ensure equitable access to public goods for all citizens.

### Poverty trends and shared prosperity
- National poverty rate fell from 30.2 percent in 2006 to 17.5 percent in 2011.
- Based on the Europe and Central Asia (ECA) regional poverty line of USD5/day (PPP) 94 percent of the population was poor in 2002 but this had declined to 55 percent by 2011.
- Incidence of extreme poverty (based on a USD 2.5 PPP poverty line) declined from 57 to 10 percent between 2002 and 2011.
- Both rural and urban areas saw sharp poverty reduction; poverty reduction occurred faster in urban areas.
- Consumption growth estimates for the period 2006-2011: average annual consumption growth of 3 percent overall, and an average 6 percent for the bottom 40 percent.
- Despite improvements, Moldova’s poverty rate based on the ECA regional poverty line is more than double the 25 percent ECA average; extreme poverty is significantly higher than the regional average of 6 percent.

### NDS as a mechanism for partner mobilization and past performance
- Previous National Development Strategy (2008–2011) presented to the Boards of IDA and the IMF in 2008 and was effective in mobilizing support from development partners.
- An evaluation report on implementation for 2009–2010 was prepared; no final report for the strategy period was produced.
- 2010 report noted government reforms in social assistance, democratic institutions, European integration, and relations with trade and development partners, including responses to the 2008–2009 financial crisis and 2010 floods.

### Roadmap for pro-poor economic growth: strategy and risks
- NDS argues for shifting from consumption-based growth (driven by remittances) to growth led by investment, productivity, exports, and a knowledge-based society.
- GDP growth targeted: rising gradually to almost 7 percent by 2020; achieving this requires macroeconomic stability and timely implementation of structural reforms.
- Risks identified: protracted slowdown in Europe and/or Russia could substantially impact remittances, exports, and FDI and threaten the growth outlook.
- Recommendation: provide further detail on assumptions (e.g., future remittances and labor migrations) underpinning growth projections for critical evaluation over time.

### Macroeconomic framework and stability
- Recommendation: incorporate a comprehensive macroeconomic framework in the NDS to underpin the growth strategy and emphasize macroeconomic stability.
- Noted improvements:
  - Adoption of an inflation targeting regime anchoring inflation around the 5 percent target, though inflation remains buffeted by volatile food and energy prices.
  - Tax policy and administration reforms, combined with expenditure rationalization, have brought the fiscal deficit close to a sustainable level.
  - Trade liberalization and investment have promoted exports and helped to gradually lower the current account deficit.
- Continued efforts, including further fiscal consolidation, are needed to secure gains.

### Public debt and overall debt position
- Public and publicly-guaranteed (PPG) debt has been steadily declining; as of end-2012 PPG debt stood below 30 percent of GDP.
- Staffs note room for modest borrowing for priority projects if prudent and prioritized.
- Concern: private external debt in Moldova is about 60 percent of GDP and is likely to increase over the medium term, with a rising share of short-term debt, raising vulnerability to external shocks.
- Recommendation: NDS should identify measures to improve allocation of capital expenditure and consider overall debt-servicing capacity in debt sustainability assessments.

### Financial sector development and supervision
- Broad concurrence with focus on increased financial intermediation:
  - Encourage consolidation of the deposit base by promoting a larger proportion of remittances through the banking sector and greater competition.
  - Progress noted in creating a legal framework for the non-banking financial sector and in credit reporting.
- Further needs:
  - Strengthening regulatory and supervisory functions.
  - Reforms to improve the collateral framework and ensure proper implementation by Government and National Bank of Moldova (NBM).
  - Attention to financial consumer protection, financial literacy and inclusion (largely absent in the strategy but important).
- Corporate governance and transparency:
  - Need to develop and fully enforce legal framework for enhanced shareholder transparency including Ultimate Beneficial Ownership.
  - Adhere to international corporate governance standards.
  - Consider legal reforms to strengthen NBM’s independence and reduce courts' ability to interfere.
  - Corporate financial reporting reforms (audit oversight, public registry of financial statements in the National Bureau of Statistics) require further steps.

### Business climate, trade, and firm-level competitiveness
- Support for clearer rules of the game for business to enhance investor confidence and increase investment flows, including FDI.
- Further regulatory reforms and strengthening of the rule of law are necessary.
- Areas for specific attention:
  - Trading across borders: customs administration and tax administration.
  - Competition policy and the court system as substantial barriers.
  - Greater emphasis on making it easier to close a business; this can impact competitive behavior and access to finance more than improvements in starting a business.
  - Emphasis on food safety and phytosanitary requirements to facilitate entry of agriculture and food products into the EU and other export markets.
- Company- and industry-level actions to translate environment improvements into revenue and jobs:
  - Management training, better access to market information, improved access to finance, and removal of industry-specific constraints.
  - Improve vocational and tertiary education to meet labor market needs.

### Road infrastructure: targets, affordability, and safeguards
- NDS recognizes importance of national and local road rehabilitation and maintenance for economic and social development and supports efficiency improvement in road maintenance.
- Concern: restoring eighty percent of roads by 2020 would require investment and maintenance expenditures difficult to mobilize and could displace other priority spending if fiscal sustainability is to be preserved.
- Recommendations:
  - Conduct adequate cost-benefit analysis to identify and prioritize good projects.
  - Establish adequate PPP legislation and significant public sector capacity building if private investment via PPPs is pursued.
  - Emphasize greater transparency and effective competition to prevent waste, fraud and abuse in the road sector.
- Note: opportunities for PPPs in the road sector may be limited by relatively low traffic levels on most of Moldova's roads.

### Energy sector vision and required conditions
- Staffs broadly concur with strategic vision focused on energy security and increasing energy efficiency.
- Recommendation: implement reforms and capacity building with strong attention to governance, a transparent regulatory framework, affordability, and financial sustainability.
- When these conditions are met, the energy sector should be better placed to attract needed investment capital.

### Agriculture: importance, vulnerabilities, and market requirements
- Agriculture is not among the seven priority areas but remains a mainstay:
  - Agriculture accounted for 12 percent of GDP and employed 28 percent of the labor force in 2010.
  - When combined with the agro-food sector, it represented about 50 percent of total exports.
- Challenges:
  - Output volatility due to climate hazards.
  - Low market competitiveness from distortions in input and output markets, poor quality public services (e.g., agricultural education), delays in farm restructuring, underdeveloped land markets, lack of access to finance, and unsustainable soil management.
  - Most agricultural produce, especially high value products, do not meet market rigor for safety, quality, quantity, variety, or packaging.
- Recommendation: support private sector efforts to adopt and implement EU food safety and quality standards; address market, education, finance, and land market constraints.

### Promoting human development: education, health, and pensions
- Health sector:
  - Although not a top-seven priority, continue reforms to improve efficiency, accessibility and quality of health care (including optimizing and upgrading the hospital network and reforming health financing).
- Education and skills:
  - NDS emphasizes upgrading education and skills to meet labor market requirements, enhance productivity, and increase employment.
  - Measures: modernize vocational education and continuous labor force training, enhance partnerships between education institutions and labor markets, improve quality of education, reform research and innovation system.
  - Recommendations:
    - Strengthen labor market analysis to distinguish cyclical and structural unemployment determinants.
    - Develop mechanisms to coordinate and promote innovation activities, e.g., ICT-enabled services with focus on skills.
    - Identify costs of proposed measures and set specific monitoring indicators.
    - Participation in international skills assessments such as the OECD Program for the International Assessment of Adult Competencies (PIAAC) to facilitate monitoring and policy design.
    - Improve governance and social accountability in the sector and continue optimization of the secondary school network and access to quality preschool education.
- Pensions:
  - NDS identifies equity and sustainability as the two main issues facing the pension system.
  - Causes of low and declining replacement rate: the indexation formula and non-valorization of past earnings.
  - Demographic pressures: small number of contributors compared to pensioners expected to worsen and threaten fiscal sustainability.
  - Strategy outlines parametric changes to enhance social and fiscal sustainability of the Pay-As-You-Go pension pillar.
  - Staffs argue more decisive policy reforms are required; recent developments were modest and insufficient.
  - Potential reform options:
    - Equalize retirement ages for men and women at 62 and consider further increases to reflect higher life expectancy.
    - Better link benefits and contributions for all groups, including farmers and emigrants.
    - Valorize past earnings with inflation to halt the sharp drop in replacement rate.
  - Implement reforms in a package to avoid undermining fiscal sustainability of the pension scheme.
  - Consider alleviation of old-age poverty in the broader context of social security policies and programs.
  - For fully-funded pension schemes (the “second pillar”), staffs agree a thorough evaluation of prerequisites and timeline is in order, particularly regarding the strength of the financial system.
  - Note: pension reform would also have a beneficial impact on savings mobilization and development of financial markets.

### Governance challenges and cross-cutting recommendations
- Emphasize improved governance, rule of law, transparency, and competition across sectors (financial, road, energy, business environment).
- Strengthen legal frameworks (shareholder transparency, Ultimate Beneficial Ownership, corporate governance standards) and institutional independence (e.g., NBM).
- Enhance corporate financial reporting, audit oversight, public registries, and social accountability mechanisms to improve service delivery monitoring and citizen engagement.

*International Monetary Fund staff assessment of Moldova 2020 (August 1, 2013)*

### 21.      To achieve the goals of the NDS, the Government of Moldova will need to strengthen

### _cr13270 - 21.      To achieve the goals of the NDS, the Government of Moldova will need to strengthen

### Strengthening public finances and public investment management
- Synchronization of sectoral expenditure plans and program-based budget planning is welcomed by staffs.
- Staffs support the links proposed between the NDS, sectoral strategies and MTBF.
- Unpredictability of resources for multi-year investment projects has reduced credibility of the budget and could limit the ability of Moldova to achieve NDS goals.
- Recommended areas to strengthen:
  - budget reform
  - public investment management
  - internal audit
  - management control
  - expenditure management (including cash planning)

### Improving efficiency and effectiveness of public service delivery; building capacity in central and local public administration
- The NDS could benefit from an increased focus on improving efficiency and effectiveness of public service delivery, and building capacity in central and local public administration.
- Suggested priorities and sequencing for service delivery improvements:
  - re-engineering and streamlining of procedures
  - integration of services
  - smart regulation
  - data warehouse and data centers services to streamline access to data
  - centralized registries with quality data, open data and remote access
  - uniform procedures for services delivered by municipalities
- Increasing capacity at central and local levels to evaluate, set, implement and manage policy priorities is essential.

### Justice sector reform
- Staffs share concerns about dysfunction in the justice system as identified by the NDS and fully agree that improvement of the judiciary should be a priority.
- Critical success factors:
  - strong political will and forceful actions
  - implementation of the specific objectives outlined in the Strategy
  - emphasis on judicial awareness in the population
  - involvement of young representatives of the judicial profession
- Fiscal caution: avoid committing unaffordable amounts of scarce budgetary resources to the sector (example cited: raising the wages of judges and prosecutors several times, as currently proposed).
- Monitoring indicators and targets could be improved (example suggested: use experiential surveys with people who had recently an actual experience with the courts [court user surveys] instead of relying only on perception surveys as is currently proposed).

### Targets, indicators, monitoring and evaluation
- The NDS establishes an integrated framework for implementation, monitoring and evaluation that:
  - ensures coherence between various national and strategic planning documents
  - coordinates implementation and monitoring of the strategy between ministerial subdivisions
  - establishes an efficient process for reviewing the strategy periodically
- Staffs welcome plan to integrate NDS implementation in the fiscal process and ensure consistency of NDS financing needs with budget planning.
- An annual Action Plan to cost and operationalize NDS goals could help better integrate policy objectives into the medium-term expenditure framework.
- Staffs welcome plans to maintain extensive consultations with civil society and other stakeholders and commend retention of the National Participation Council (includes representatives of various NGOs, private sector, and trade union stakeholders).

### Conclusion and implementation risks
- Bank and Fund staffs believe the NDS provides a good basis for inclusive growth in Moldova, but that implementation will be key.
- The focus on pro-poor economic growth (through private sector development and improved infrastructure), human development and governance is appropriate given Moldova’s current situation.
- Consolidation into one document of priorities should enable efficient monitoring and coordination among development partners.
- Particular attention needed to the relation between the NDS and existing national and sectoral strategies, and how they will inform the Medium-Term Budgetary Framework and annual Budget Laws.
- Implementation risks to be actively managed:
  - external terms of trade shocks
  - weakness in implementation capacity
  - the political cycle

### Staffs’ recommended priority areas for implementing and strengthening the NDS
- Monitoring and evaluation:
  - strengthen the monitoring framework and capacity of key line ministries to develop and implement annual action plans
  - integrate these actions into the medium-term expenditure framework
- Public Administration Reform:
  - place greater emphasis on civil service management reforms
- Business environment:
  - improve corporate governance in the financial sector and the broader economy, particularly in light of recent ownership disputes in the banking sector
  - reforms in the justice sector are essential to protect investors and foster investment
- Physical infrastructure development:
  - priority investment areas: energy, telecommunications, transportation, water, and sanitation infrastructure
  - consider private sector partnerships
- Human resource development:
  - ensure the educational system is aligned with European standards and responsive to labor market needs
  - improve incentives to health care providers to both improve efficiency and deliver quality health services, critical to meet the MDGs

* _cr13270 - 21.      To achieve the goals of the NDS, the Government of Moldova will need to strengthen*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr13270.pdf_