IMF Executive Board Concludes Ad-Hoc Review Under the Extended Credit Facility and Approves Augmentation and Rephasing of Access under the Extended Credit Facility and Extended Fund Facility Arrangements for the Republic of Moldova

May 11, 2022

  • The war in Ukraine has resulted in significant spillovers to Moldova.
  • The resources under the augmented ECF/EFF arrangements will help Moldova address challenges emanating from the war in Ukraine, catalyze additional external financing, protect social cohesion by providing needed budget support to most vulnerable, and give further impetus to crucial reforms. The immediate disbursement of US$144.81 million will help Moldova meet pressing war-induced balance of payments financing needs.
  • The program is on track. The goals of addressing balance of payment imbalances, and strengthening governance and institutional frameworks, through an ambitious set of structural reforms are maintained.

Washington, DCMay 11, 2022: The Executive Board of the International Monetary Fund (IMF) today concluded the ad-hoc review [1] under the Extended Credit Facility and Extended Fund Facility Arrangements [2] for the Republic of Moldova. This makes about USD 144.81 million (SDR 108.15 million) available to Moldova immediately. The Board also approved an augmentation and rephasing of access under the program. Total access under the blended 40-month ECF/EFF arrangements approved in December 2021 ( Press Release ) was increased by about US$260.11 million (SDR 194.26 million) to about US$795.72 million (SDR 594.26 million).

Spillovers from the war in Ukraine are affecting the Moldovan economy through a variety of channels, including a spike in energy prices, trade disruptions, adverse confidence effects and the indirect impact of sanctions. Already over 400,000 refugees fleeing the conflict have entered Moldova—by far the highest of any country in per capita terms. Most have since transited to other countries, but about a quarter of them currently remain there. The immediate disbursement under the blended ECF/EFF program will allow Moldova to meet pressing balance of payments financing needs arising from these shocks.

Following the Executive Board discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, made the following statement:

“Directors commended the Moldovan authorities for their strong commitment to the Fund-supported program, despite the challenging environment. They noted that the spillovers from the war in Ukraine and international sanctions on Russia and Belarus, including trade disruptions, higher and more volatile energy prices, and the continued influx of a large number of refugees, have had a significant impact on Moldova and led to increased external financing needs.

“Directors commended the authorities for their swift response to the crisis and welcomed the adoption of the supplementary budget to protect vulnerable households, accommodate refugees’ humanitarian needs and maintain social cohesion. Directors underscored, however, that strong implementation of the budget envelope as well as careful monitoring of revenue performance and additional spending pressures will be important going forward. They emphasized that fiscal plans should remain anchored by a strong commitment to debt sustainability. Given the unprecedented uncertainty, Directors welcomed the authorities’ readiness to activate contingency plans, should risks materialize.

“Directors welcomed the central bank’s decisive policy response to increased inflation. They noted that the financial sector has remained resilient despite temporary liquidity pressures. Going forward, Directors broadly concurred that careful calibration of monetary tightening to balance financial stability and growth objectives will be important. Further foreign currency interventions should be limited to preventing a disorderly adjustment of the exchange rate and curbing excess exchange rate volatility.

“Directors commended the authorities for keeping the program on track and making good progress on key reforms, including the completion of structural commitments on fiscal governance, financial sector oversight, oversight of state-owned enterprises, and strengthening anti-corruption legislation. They encouraged continued progress on the integrated taxpayers’ register, the comprehensive tax expenditure analysis, and the reinforcement of the National Bank of Moldova’s institutional autonomy.

“Directors emphasized that the program’s focus on addressing significant governance weaknesses and institutional vulnerabilities remains critical and welcomed the emphasis on strengthening the rule of law and financial supervision. They noted that continued reforms under the program—if appropriately sequenced and resolutely implemented—will boost productivity, unlock private investment and support inclusive, sustainable growth.”

[1] An ad hoc review between scheduled reviews can be requested by a program country when the increase in the underlying balance of payments problems cannot await the next scheduled review. Ad hoc reviews require an assessment by the IMF Executive Board that the program is on track to achieve its objectives.

[2] Arrangements under the ECF provide financial assistance that is more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis (e.g. protracted balance of payments problems). Those under the EFF provide assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position.

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