IMF Team Reaches Staff-Level Agreement on Moldova’s First Extended Credit Facility Review and Extended Credit Facility Arrangements

IMF Team Reaches Staff-Level Agreement on Moldova’s First Extended Credit Facility Review and Extended Credit Facility Arrangements

August 10, 2022

End-of-mission press releases include statements from IMF staff conveying preliminary findings after a visit to a country. The views expressed in this statement are those of IMF staff and do not necessarily represent the views of the IMF Executive Board. Based on the preliminary findings of this mission, staff will prepare a report which, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

  • The IMF team reached a staff-level agreement with the Moldovan authorities for the completion of the first review under the Extended Credit Facility and Extended Credit Facility arrangements.
  • The fallout from Russia’s invasion of Ukraine, including soaring food and energy prices, trade disruptions, the influx of refugees and the effects on confidence continue to weigh on the outlook for the Moldovan economy.
  • Increased financial support from the IMF and donors is essential to help the authorities cope with these exogenous shocks while providing additional resources to meet urgent socio-economic needs.

An International Monetary Fund (IMF) mission, led by Mr. Ruben Atoyan, conducted discussions from July 20 to August 10 in Chișinău and at IMF headquarters for the first review of Moldova’s program under the Extended Facility (ECF) and the Extended Financing Facility (EFF). Mr. Atoyan released the following statement.

“The IMF team has reached a staff-level agreement with the Moldovan authorities on the policies needed to complete the first review under the program. The agreement is subject to approval by the IMF’s Executive Board, which is due to consider this review in September. SDR 20.65 million (about US$27 million) would be available after the Board meeting, bringing total disbursements under the program to about US$245 million.

“Program implementation remains strong despite severe and interrelated shocks. The authorities have met all performance criteria and program-supported structural reforms in the areas of anti-corruption, rule of law, fiscal sector governance, and financial sector supervision are progressing rapidly . Authorities appointed the head of the anti-corruption prosecution office — a milestone under the program — in June, well ahead of schedule. Successive shocks have not dampened the authorities’ determination to advance much-needed reforms, reaffirming strong ownership and commitment to the program.

“The war in Ukraine, however, continues to significantly affect the Moldovan economy. Real GDP is expected to stagnate in 2022. The repercussions of a deteriorating global outlook, supply disruptions and rising input costs are compounded by adverse drought conditions for agricultural production. Inflation accelerated sharply due to higher energy and food prices, and the exchange rate depreciated, reflecting exceptionally difficult market conditions. Fiscal indicators remain robust in the first half of 2022, reflecting the confluence of increased revenues and grants, but also below-average execution of approved budget expenditures. Well capitalized, liquid and profitable, the banks have weathered the impact of the current crisis satisfactorily.

“The National Bank of Moldova’s data-driven approach to monetary policy has been instrumental in anchoring inflation expectations. Since the beginning of the year, the authorities have adjusted their monetary policy to contain the second-round effects of rising imported inflation and supply-side disruptions. With the inflation outlook marred by the deteriorating external environment, the authorities remain committed to exchange rate flexibility, which acts as a shock absorber, and foreign exchange interventions will be limited to smoothing excessive volatility and preventing disorderly market conditions.

“The 2022 supplementary budget agreed with the mission rightly includes additional allocations to protect vulnerable people from rising energy and food prices. Going forward, concerted efforts are needed to address the persistent under-execution of approved budget expenditures with a view to improving spending efficiency and enhancing budget credibility. With downside risks, strong political momentum remains essential to secure fiscal financing from external partners.

“Downside risks continue to weigh on the economic outlook. Stronger than expected increases in energy prices, disruptions in energy supply, escalating international food prices, rising costs of living and the proximity of war in Ukraine could further derail the activity and damage trust, aggravating political compromises. Resolute implementation of a comprehensive reform package and continued support from the IMF and other partners would build confidence.

IMF Communications Department


Call: +1 202 623-7100E-mail: [email protected]

@IMF Spokesperson

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