## Press Release: IMF Approves Stand-By Credit for the Republic of Moldova

_IMF News, March 22, 1995_

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**Canonical URL:** [Press Release: IMF Approves Stand-By Credit for the Republic of Moldova](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9515)

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## Bibliographic details
- Published: March 22, 1995

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### Approval and Program Financing
- The International Monetary Fund (IMF) approved a 12-month stand-by credit for the Republic of Moldova of up to SDR 58.5 million (about $90 million).
- The credit is in support of the Government's economic program for 1995.

### Background and Recent Developments
- Key prior actions:
  - Introduction of Moldova's national currency in November 1993.
  - Support from IMF stand-by and systemic transformation facility (STF) credits and additional multilateral and bilateral financing.
- Outcomes under IMF-supported programs in 1994:
  - Broadly stable exchange rate.
  - Reduction in inflationary pressures.
  - Lower interest rates during 1994.
- Ongoing challenges in 1994:
  - Continued output decline due to the collapse of central planning, drought, and other weather-induced damage to the agricultural sector.
  - Weak financial discipline in the state enterprise sector despite an ambitious auction schedule.
  - Severe balance of payments pressure resulting from the move to world prices for imported energy and weather-related disasters.
- IMF membership and quotas:
  - Moldova became a member of the IMF on August 12, 1992.
  - Its quota is SDR 90.0 million (about $138 million).
  - Its outstanding use of IMF credit currently totals SDR 122 million (about $188 million).
  - Note: SDR amount changed from 112 million to 122 million.

### The 1995 Program: Objectives and Macroeconomic Targets
- Overall objectives:
  - Consolidate financial stabilization.
  - Implement structural transformation measures to restore economic growth and improve living standards.
- Specific program targets for 1995:
  - Economic growth of 1.5 percent, led by a recovery in the agricultural sector with the return of normal weather conditions.
  - Reduction in the annual rate of inflation to about 10 percent from 116 percent in 1994.
  - Containment of the deficit in the current account of the balance of payments.
- Fiscal policy:
  - Aim to sharply reduce the budgetary deficit to the equivalent of 3.5 percent of GDP from 8.1 percent of GDP in 1994.
  - Measures to achieve this:
    - Adjustments to tax rates.
    - Strengthening of tax administration and arrears collection.
    - Overall expenditure reductions while maintaining outlays in high-priority areas such as health care and education.
- Monetary policy:
  - Will remain tight to support the inflation and balance of payments objectives.
  - Will rely increasingly on indirect, market-based instruments of monetary control.

### Structural Reform Policies and Measures
- Privatization:
  - Accelerated privatization program under which 1,500 enterprises will be sold in 1995/96 at market prices.
- Legal and institutional reforms:
  - Review of key legislation to meet market economy requirements, including establishing the legal basis for bankruptcy proceedings against insolvent state enterprises.
- Financial sector reforms:
  - Development of indirect, market-based monetary controls following the introduction of treasury bill auctions and other market instruments.
  - Measures to strengthen the capital base of the banking system.
  - Facilitation of entry of new foreign and domestic banks.
- Main objective:
  - Establish an environment conducive to private investment by reducing direct government intervention and enhancing the role of market forces in resource allocation.

### The Challenge Ahead
- Emphasis:
  - Structural reforms are crucial for the ultimate success of Moldova's transition to financial stabilization and a market economy.
- Risks and lessons:
  - Delays in early 1994 were costly in terms of eroding public support for financial stabilization and growth restoration.
  - The acceleration of structural reforms in late 1994 needs to be sustained in 1995 and over the medium term for economic transformation to succeed.

### Selected Economic Indicators (as presented)
- Real GDP (percent change):
  - 1992: –29.1
  - 1993: –8.7
  - 1994*: –22.2
  - 1995**: 1.5
- Consumer price inflation (end of period):
  - 1992: 2,198.0
  - 1993: 837.0
  - 1994*: 116.0
  - 1995**: 9.4
- External current account balance (deficit –) (millions of dollars):
  - 1992: –38.9
  - 1993: –181.8
  - 1994*: –177.0
  - 1995**: –181.1
- Government budget balance (deficit –) (percent of GDP):
  - 1992: –23.4
  - 1993: –6.8
  - 1994*: –8.1
  - 1995**: –3.5
- Sources: Moldovan authorities; and IMF staff estimates.
- Note: *Preliminary. **Program.

*International Monetary Fund*

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## References

- [Republic of Moldova and the IMF](http://www.imf.org/external/country/MDA/index.htm)
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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9515_