IMF Executive Board Completes Sixth and Final Review of Moldova's Extended Credit Facility and Extended Fund Facility

IMF News, March 11, 2020

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Canonical URL: IMF Executive Board Completes Sixth and Final Review of Moldova's Extended Credit Facility and Extended Fund Facility

Press Release No. 20/85, March 11, 2020.
The Executive Board completed the sixth and final review of Moldova’s economic performance under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements.
Completion of the review enables the disbursement SDR 14.4 million (about US$ 20 million), bringing total disbursements under the arrangements to SDR 129.4 million (about US$ 178.7 million).
Moldova’s 40-month ECF/EFF arrangements to support the country’s economic and financial reform program were approved on November 7, 2016.
The Executive Board also concluded the 2020 Article IV Consultation with Moldova; a separate press release will be issued shortly.

"The three-year program has been broadly successful in achieving its objectives."
Comprehensive reforms have:
- rehabilitated the banking system, and
- strengthened financial sector governance, entrenching macro-financial stability.
"Significant progress has been achieved in reforming the banking sector, including by securing bank shareholder transparency via fitness and probity of bank owners, improved supervisory and regulatory frameworks, unwinding bank related-party exposures, and strengthening financial safety nets."

Growth remains insufficient to significantly boost living standards.
Risks and priorities identified:
- Risks in the non-bank financial sector.
- Gaps in the AML/CFT framework.
- Need for decisive progress on asset recovery.
- Widespread governance and institutional vulnerabilities.
The National Bank of Moldova (NBM) should maintain and strengthen its inflation-targeting regime, operational framework, and capacity; safeguarding NBM’s independence is described as "critical to preserve hard-won gains in bank rehabilitation and fulfill its mandates of maintaining price and financial sector stability."

"It is imperative that the authorities continue to pursue a prudent and well-coordinated policy mix, including structural reforms aimed at further strengthening the financial sector, a growth-friendly fiscal policy to increase infrastructure spending and support priority social expenditure while maintaining fiscal sustainability, and strengthening Moldova’s governance framework and institutions."
Fiscal and public finance actions:
- Adopt a "growth-friendly 2020 budget" to address "significant infrastructure and developmental needs."
- Continue engagement with external partners to secure needed financing for urgent projects.
- Prioritize reforms for revenue mobilization, streamlining tax expenditures, and increasing the efficiency of public spending and investment management.
Structural reforms:
- Launch comprehensive reforms of Moldova’s large SOE sector.
- Strengthen supervisory and regulatory frameworks, particularly for the non-bank financial sector, SOEs, and AML/CFT.
- Enforce the rule of law to help boost growth potential and accelerate income convergence with the rest of Europe.
Financial stability measures:
- Address risks in the non-bank financial sector.
- Improve the AML/CFT framework.
- Make decisive progress on asset recovery.

Strengthening governance, institutions, and regulatory frameworks is expected to:
- contribute significantly to growth dividends, and
- help unlock Moldova’s untapped economic potential.

International Monetary Fund press release, March 11, 2020.