The Government of Moldova and the International Momentary Fund agreed to launch a new economic reform program with access under the ECF/EFF arrangement to SDR 400 million or about US$ 564 million over the next 40 months, IPN reports.
“The reaching of the staff-level agreement is a catalyst for new financing from other development partners and gives increased confidence to investors and greater freedom in implementing social, infrastructure and economic programs to the Government,” Prime Minister Natalia Gavrilița stated in a news conference held jointly with the IMF Resident Representative in Moldova Rodgers Chawani on the occasion of the completion of expert-level discussions.
Speaking about the areas that will benefit from financial support, the Premier mentioned the modernization of the country, which means better infrastructure, highways and local roads of a higher quality, sewerage networks and wastewater treatment stations. She said that to go on, the agricultural sector should be modernized and the state should increase its participation in industrial, information and other kinds of investment projects. In essence, the goal is to improve the quality of the vital systems of society, such as education, healthcare, security, social protection, and justice.
“We will continue to fight smuggling and tax evasion by improving tax and customs administration and will rationalize costs so as to make sure that the budget funds are used for the citizens’ benefit,” stated the official.
For his part, Rodgers Chawani said the first tranche of US$81 million is to be disbursed until the end of this year. He made reference to the IMF Mission Chief Ruben Atoyan’s opinion that “public spending is inefficient and poorly targeted, with low-quality and inaccessible infrastructure. A weak business environment constrains private investment and productivity while the rule of law and anti-corruption frameworks are ineffective. High emigration, particularly among the better-educated Moldovans, continues to retard human capital accumulation.”
Rodgers Chawani noted that the economy is rebounding from a deep economic downturn, with growth projected at 7½ percent in 2021, spurred by strong domestic demand. CPI inflation accelerated, driven by the recovery in demand and surging energy and food prices. The fiscal deficit is projected to reach 5 percent of GDP in 2021 owing to higher crisis-related spending. Public debt has edged up to 34 percent of GDP and the external position has deteriorated due to rising global commodity prices and the pickup in domestic economic activity.
Despite the ongoing recovery, downside risks continue to beset the outlook. New waves of COVID-19 infections, slower-than-expected economic recovery of trading partners, higher energy prices, and a resurgence of political instability could derail the recovery. Prudent and well-coordinated policies are needed to mitigate the risks and foster resilience, consider the backers.
The staff-level agreement is subject to IMF Management and Executive Board approval. The Board’s consideration is expected in December, subject to the implementation of several prior actions, including on central bank independence, the correction of past policy slippages, and the adoption of credible fiscal plans.