IMF Executive Board Concludes First Reviews Under the Extended Credit Facility and Extended Fund Facility Arrangements for the Republic of Moldova
IMF News, September 21, 2022
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- Published: September 21, 2022
Program actions and financing
- The Executive Board completed the first reviews under the 40-month Extended Credit Facility (ECF) and Extended Fund Facility (EFF) Arrangements for the Republic of Moldova.
- Immediate disbursement: SDR 20.65 million (about US$ 27 million), usable for budget support.
- Total disbursements under the blended ECF/EFF arrangements after this review: SDR 185.95 million (about US$ 242 million).
- The 40-month ECF/EFF arrangements were approved in December 2021 and augmented in May 2022 to increase total access under the arrangements to SDR 594.26 million.
Near-term economic outlook and risks
- The impact of the war in Ukraine has yet to fully materialize, with the economy projected to stagnate in 2022 amid spillovers from the war, rising food and energy costs, and fragile confidence.
- Spillovers from the war in Ukraine continue to weigh on Moldova’s outlook.
- The economy is expected to stagnate in the near term, with inflation remaining high amid rising food and energy prices.
- Current account and fiscal deficits are expected to widen significantly in the current year.
- Risks to the outlook remain exceptionally high, including those related to the regional energy crisis.
Program implementation and reforms
- Moldova’s program is advancing governance reforms critical to increasing the country’s resilience to shocks, while also providing additional resources to meet urgent socio-economic needs.
- Completion of important program commitments in:
- fiscal and financial governance,
- rule of law,
- anti-corruption.
- The authorities have successfully completed structural commitments on fiscal governance, financial sector oversight, and on strengthening anti-corruption legislation, and even included additional conditionality to support the fiscal structural agenda.
Policy priorities and recommendations (as stated by Mr. Kenji Okamura, Deputy Managing Director and Acting Chair)
- Maintain strong policy momentum to:
- secure additional grant and concessional financing from donors needed to finance one-off spending pressures,
- retain adequate fiscal buffers,
- reduce reliance on short-term domestic financing.
- Continue reform implementation and contingency planning to create a solid foundation for strong and inclusive growth.
- Near-term focus: curb soaring inflation while protecting the most vulnerable from escalating energy and food costs.
- Maintain an appropriate policy mix given persistent inflationary pressures, budget financing constraints, and exceptional downside risks around the baseline.
- Concerted efforts needed to:
- improve spending efficiency,
- foster budget credibility,
- mobilize domestic revenue,
- advance energy and SOE reforms.
- Safeguard the independence of the National Bank of Moldova to reinforce its credibility and strengthen policy effectiveness.
- Prompt adoption of legislation to reinforce the institutional autonomy of the National Bank of Moldova by end-October is critical.
- Strengthen financial supervision and regulation, especially given vulnerabilities to the non-bank sector.
Press Release No. 22/316 — September 21, 2022, IMF Communications Department.
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