IMF Executive Board Concludes Third Review Under the Extended Credit Facility and Extended Fund Facility Arrangements for the Republic of Moldova

IMF News, April 26, 2023

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Canonical URL: IMF Executive Board Concludes Third Review Under the Extended Credit Facility and Extended Fund Facility Arrangements for the Republic of Moldova

The Executive Board completed the third review under the 40-month Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements.
Immediate disbursement: SDR 70.95 million (about US$96 million), usable for budget support.
Total disbursements under the blended ECF/EFF arrangements to date: SDR 277.55 million (about US$371 million).
Original program access after augmentation: SDR 594.26 million (augmentation referenced in source materials).

Moldova’s economy contracted sharply in 2022, reflecting spillovers from the war.
A modest recovery is expected in 2023, supported by a pickup in domestic demand and better growth prospects in trading partners.
Inflation remains high but continues to decline rapidly.
Fiscal policies are focusing on mitigating the impacts of the overlapping crises and supporting economic recovery.
International reserves continue to provide an adequate safeguard against external shocks.
Banking sector condition noted as well-capitalized, liquid, and profitable, having weathered the initial impact of the war.

Principal risk: further escalation of the war, leaving the outlook subject to extreme uncertainty.
Russia’s war in Ukraine and its proximity to Moldova continue to fuel security concerns.
Prudent use of contingency plans has reduced energy security risks for now and supported the most vulnerable through the cost-of-living crisis.
Near-term priorities recommended given high uncertainty:
- Mitigate the impact of the war.
- Ensure energy security.
- Adapt contingency plans to evolving risks.
- Maintain an appropriate policy mix.

Monetary policy:
- Current gradual monetary policy easing described as appropriate given the inflation outlook.
- Future monetary policy decisions should remain data-driven and forward looking, with further easing conditional on a persistent decline of both headline and core inflation.
Fiscal policy:
- Authorities plan to reorient spending toward supporting the recovery once near-term pressures from the crises subside.
Structural and institutional reforms emphasized:
- Advance reforms in fiscal governance.
- Strengthen financial sector oversight.
- Improve governance and efficiency of state-owned enterprises.

Program implementation remains strong despite the challenging environment.
Recent completion of important reforms aimed to:
- Promote the integrity, capacity, and independence of key anti-corruption institutions.
- Enhance enforcement of the anti-corruption legal framework.
Authorities are developing an ambitious agenda to address climate-related challenges.
Authorities have expressed interest in receiving financing under the IMF’s Resilience and Sustainability Facility to support climate-related policy and development goals and to help catalyze official and private financing for green investments.

IMF Press Release No. 23/128, April 26, 2023