## Moldova: Back From The Brink, And Getting Better

_IMF News, September 6, 2017_

## Source details

**Canonical URL:** [Moldova: Back From The Brink, And Getting Better](https://www.imf.org/en/news/articles/2017/09/05/na090617-moldova-back-from-the-brink-and-getting-better)

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## Bibliographic details
- Published: September 6, 2017

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### Overview
- Interview with Octavian Armasu, Minister of Finance (since 2016), and Sergiu Cioclea, Governor of the National Bank of Moldova, conducted during a conference on economic governance in Dubrovnik, Croatia, in July 2017.
- Moldova is described as a landlocked country of 3.6 million, wedged between Romania and Ukraine.
- The country posted economic growth of 4.1 percent in 2016 and is broadly on track with a $179-million economic reform program supported by the IMF.

### Macroeconomic performance and IMF program
- Findings:
  - Robust growth of 4.1 percent in 2016.
  - IMF-supported economic reform program valued at $179-million.
- Role of the IMF program:
  - Restored trust of external development partners and citizens.
  - Helped depoliticize the economic reform agenda and led to passage of important measures and legislation.
  - Provided credibility that aided central bank engagement with prospective international strategic investors in the banking sector.
- Timeline highlights:
  - First meeting with the IMF in Washington in late April 2016.
  - IMF dispatched a team to Moldova in May 2016.
  - Mission to negotiate staff-level agreement in July 2017.
  - IMF program approved on November 7, 2016.

### Banking sector crisis and reform agenda
- Crisis context:
  - A 2014 banking fraud triggered a bailout and a political crisis that lasted almost two years, causing loss of access to external financing and loss of political credibility.
- Central bank response and reforms (actions described by Sergiu Cioclea):
  - Curbing inflation and stabilizing foreign exchange rate expectations.
  - Swift measures to stabilize the banking sector.
  - Imposition of new shareholder transparency and management accountability rules.
  - Promotion of bank recovery and resolution legislation and Basel III-inspired regulation.
  - Nomination of two technocrats as vice-governors to make the central bank’s executive board fully independent from political parties.
  - Promotion of cashless payment systems to increase accountability and tracking of financial flows.
- Structural objective:
  - Reorient banks to convert a large deposit base into healthy credits to the economy, addressing low financial intermediation and limited credit activity concentrated in large corporations.
  - Attract international strategic investors to accelerate banking sector restructuring.

### Structural reforms and business climate
- Reforms initiated by the government taking office in January 2016:
  - Major reform of the banking sector.
  - Reform of the pension system.
  - Reform of public administration.
- Policy priorities to support sustained growth (as stated by Octavian Armasu):
  - Improve business climate to leverage access to the EU market via the free-trade agreement in 2014.
  - Better tax and customs administration.
  - Reduced bureaucracy and a business-friendly approach to state inspections.
  - Human capital development and reform of the education system to build long-term competitive advantage.
  - Reform of the justice system and intensified fight against corruption.

### Anti-corruption and institutional strengthening
- Core observation:
  - Fighting corruption requires political will and stronger state institutions; weak, oversized, inefficient public administration and underpaid public servants undermine rule of law.
- Government strategy:
  - Public administration reform is the top priority to address major institutional weaknesses from which other problems arise.
- Central bank perspective on transparency:
  - Higher transparency in the banking sector, robust anti-money laundering and know-your-customer policies, and strengthened supervision regulations are powerful tools to increase overall economic and societal transparency.
  - Transparency supports “economic democracy,” enabling business access to financing based on business plans and risk profiles rather than political affiliations.

### IMF engagement: experience and perceptions
- Government and public response:
  - After five governments since November 2014 and a deeply divided society, there was high trust in the IMF’s advice and technical competence.
  - The IMF’s involvement helped depoliticize reforms and enabled passage of needed legislation.
- IMF’s operational tempo and impact (as recounted by Cioclea):
  - Rapid response: meetings and missions in April–May 2016 leading to program approval on November 7, 2016.
  - The IMF’s speed of response is credited with preventing severe financial problems in 2016.
  - IMF economists were perceived as experienced and reasonable in proposing suitable solutions.

### Key statistics and dates
- Population: 3.6 million
- Real GDP growth in 2016: 4.1 percent
- IMF-supported reform program size: $179-million
- Banking crisis origination: November 2014
- Number of governments since November 2014: five
- Government took office: January 2016
- First IMF meeting in Washington: late April 2016
- IMF team dispatched to Moldova: May 2016
- Staff-level negotiation mission: July 2017
- IMF program approval date: November 7, 2016

*Source: IMF News — Moldova: Back From The Brink, And Getting Better, September 6, 2017.*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [conference](http://www.imf.org/en/News/Seminars/Conferences/2017/04/28/reaccelerating-convergence-in-central-eastern-and-southeastern-europe)
- [Boštjan Jazbec](https://www.imf.org/en/News/Articles/2017/09/06/na091217-slovenias-central-bank-governor-institutions-are-the-people-who-govern-them)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2017/09/05/na090617-moldova-back-from-the-brink-and-getting-better_