REUTERS:
IMF urges Moldova leadership to take action on debt

By Dmitry Chubashenko

VIENNA, May 24 (Reuters) - The International Monetary Fund on Thursday warned the new Communist leaders of ex-Soviet Moldova to engage in debt restructuring talks or else endanger their reputation among international lenders.

The tiny agricultural state between Ukraine and Romania saw Communists sweep to power in
February elections, ousting a centrist government which had built bridges with the IMF and started tentative economic reform.

"Moldova's external debt is a very difficult problem. Its level is high and the room for
manoeuvre is small," John Odling-Smee, the director of the IMF's European II Department, told reporters in Vienna by video link from Washington. Moldova has earmarked 37 percent of its budget revenue for debt servicing this year.

Foreign debt is set to grow seven percent to $779 million while domestic debt is around $150
million. Additionally, Russia's Gazprom natural gas monopoly says impoverished Moldova
owes it $827 million for unpaid deliveries.

"It would be very inadvisable for Moldova to even consider not paying its debts," Odling-Smee
said. "It would receive no new credits and put itself in the company of previously defaulted
countries. It is very difficult to recover a reputation." He said the IMF was willing to discuss debt restructuring with Moldova, but would first like to see an agreement between it and the new government.

The Fund last year approved a $142 million poverty reduction programme, but has so far only paid out two tranches of $24 million. Moldova has said it will press ahead with reforms, although some Communist parliamentarians have talked about abandoning privatisation plans.

"We interpret this as a debate within the new leadership which is not yet settled," Odling-Smee
said. "We have to wait and see the the result in that debate (before resuming lending)."

Thursday, 24 May 2001 15:47:06