IMF Executive Board Completes the Fourth and Fifth Reviews under the Extended Credit Facility and Extended Fund Facility Arrangements for the Republic of Moldova
IMF News, September 20, 2019
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- Published: September 20, 2019
Key actions and program status
- Executive Board completed the fourth and fifth reviews under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) Arrangements on September 20, 2019.
- The completion makes available a cumulative amount of SDR33.6 million (about US$46.1 million) to Moldova.
- The Board approved Moldova’s request for extension of the arrangements to March 20, 2020 and rephasing of access to allow for successful completion of the program.
- The ECF/EFF arrangements total SDR 129.4 million (about US$178.7 million, or 75 percent of the Republic of Moldova’s quota) and were approved on November 7, 2016 (see Press Release No 16/491). The arrangements aim to support the country’s economic and financial reform program.
- Program assessment: “The program remains broadly on track, with strong ownership, and past policy slippages are fully corrected.”
Financial sector reforms — progress and remaining priorities
Findings and progress:
- “Significant progress has been achieved in the financial sector’s reform agenda.”
- Important measures completed to secure shareholder transparency and fitness and probity of the domestic banking system.
- Progress achieved in improving supervision, regulatory frameworks, unwinding bank related-party exposures, and strengthening financial safety nets.
Remaining critical tasks:
- Exit of the second largest bank from temporary administration.
- Address rising risks in the non-bank financial sector.
- Improve the AML/CFT framework.
- Make decisive progress on asset recovery.
Fiscal policy and public finances
Findings:
- “The amended 2019 budget will help mitigate immediate fiscal pressures.”
Policy priorities and recommendations:
- Strong implementation of adopted measures is key to ensure fiscal sustainability while securing needed fiscal space for priority projects.
- New initiatives need to be carefully costed.
- Continue efforts to strengthen tax administration and compliance.
- Streamline tax expenditures.
- Reduce risks from SOEs and PPPs.
- Strengthen public investment management to improve the efficiency of public investments and scale up public infrastructure.
Monetary policy and central bank governance
Recommendations:
- Monetary policy should continue to focus on maintaining price stability in the context of a flexible exchange rate regime.
- The NBM should continue to improve its operational framework and capacity.
- Safeguarding the NBM’s independence is critical for its ability to fulfill its mandates of maintaining price and financial sector stability.
Structural reforms and growth
Priority reform areas highlighted:
- Improve governance and fight corruption.
- Strengthen bank intermediation.
- Implement transparent and predictable energy tariff policy.
- Promote a business-friendly environment.
Expected outcomes:
- These measures are needed to unlock Moldova’s economic potential, boost growth potential, and raise incomes.
Statement excerpt (Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair)
- “The Moldovan authorities have taken decisive corrective measures to bring the Fund-supported program back on track and to achieve its objectives of ensuring macroeconomic stability and advancing reforms. Going forward, it is critical that the authorities continue to pursue prudent policies and structural reforms aimed at strengthening the financial sector, maintaining fiscal sustainability, and creating space for social and infrastructure spending.”
- Additional direct quotations in the statement detail the financial sector progress and the policy priorities summarized above.
IMF Press Release No. 19/344 — September 20, 2019