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
IMF News, May 11, 2022
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- 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
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- Published: May 11, 2022
Key outcomes and summary
- The Executive Board concluded an ad-hoc review under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements for the Republic of Moldova on May 11, 2022.
- The decision makes about US$144.81 million (SDR 108.15 million) available to Moldova immediately.
- Total access under the blended 40-month ECF/EFF arrangements originally approved in December 2021 was increased by about US$260.11 million (SDR 194.26 million) to about US$795.72 million (SDR 594.26 million).
Financing, disbursement, and program status
- Immediate disbursement: US$144.81 million (SDR 108.15 million).
- Augmentation of total access: increase by about US$260.11 million (SDR 194.26 million).
- New total access under blended 40-month ECF/EFF: about US$795.72 million (SDR 594.26 million).
- The program is on track to achieve its objectives of addressing balance of payments imbalances and strengthening governance and institutional frameworks through structural reforms.
Economic impact of the war in Ukraine on Moldova
- Identified channels of spillovers: spike in energy prices, trade disruptions, adverse confidence effects, and indirect impact of sanctions.
- Refugee influx: over 400,000 refugees fleeing the conflict have entered Moldova—by far the highest of any country in per capita terms; about a quarter of them currently remain in Moldova.
- The immediate disbursement is intended to help meet pressing war-induced balance of payments financing needs.
Executive Board / Directors’ observations and priorities (as stated by Mr. Kenji Okamura, Deputy Managing Director and Acting Chair)
- Commendations and assessments:
- Directors commended the Moldovan authorities for strong commitment to the Fund-supported program despite the challenging environment.
- Directors noted that spillovers from the war in Ukraine and international sanctions on Russia and Belarus have increased external financing needs.
- Fiscal policy and social protection:
- Directors welcomed the adoption of the supplementary budget to protect vulnerable households, accommodate refugees’ humanitarian needs and maintain social cohesion.
- Directors underscored that strong implementation of the budget envelope and careful monitoring of revenue performance and additional spending pressures will be important going forward.
- Directors emphasized that fiscal plans should remain anchored by a strong commitment to debt sustainability.
- Given unprecedented uncertainty, Directors welcomed the authorities’ readiness to activate contingency plans, should risks materialize.
- Monetary and financial sector policy:
- Directors welcomed the central bank’s decisive policy response to increased inflation.
- Directors 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.
- Governance and structural reforms:
- Directors commended authorities for keeping the program on track and making good progress on key reforms, including:
- Completion of structural commitments on fiscal governance.
- Financial sector oversight.
- Oversight of state-owned enterprises.
- Strengthening anti-corruption legislation.
- Directors encouraged continued progress on:
- The integrated taxpayers’ register.
- The comprehensive tax expenditure analysis.
- Reinforcement of the National Bank of Moldova’s institutional autonomy.
- Directors emphasized that addressing significant governance weaknesses and institutional vulnerabilities remains critical and welcomed the emphasis on strengthening the rule of law and financial supervision.
- Directors noted that continued reforms—if appropriately sequenced and resolutely implemented—will boost productivity, unlock private investment and support inclusive, sustainable growth.
Definitions and procedural note
- Ad hoc review: 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.
- ECF and EFF purpose:
- ECF: provides 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).
- EFF: provides assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position.
IMF Press Release No. 22/149 — May 11, 2022.