IMF AGREES DEAL TO RESTORE FUNDING TO MOLDOVA

CHISINAU, Aug 8 (Reuters) - The International Monetary Fund said on Wednesday it was encouraged by Moldova's economic progress and had agreed to resume lending if the former Soviet republic met some legislative conditions.

"We have reached an agreement of understanding which subsequently will lead to resumption of
financing," Richard Haas, head of the IMF's mission to Moldova, told a news conference in the
capital, Chisinau.

Haas said Moldova needed to adopt laws on bankruptcy and financial disclosure before he
recommended to the IMF board that the lender should resume funding. He said the IMF, which froze lending earlier this year when the Communist Party was voted back into power, would help Moldova with its 2002 budget law.

IMF SET TO RESTORE LENDING TO COMMUNIST MOLDOVA--UPDATE

CHISINAU, Aug 8 (Reuters) - The International Monetary Fund said on Wednesday it was encouraged by Communist-ruled Moldova's economic progress and had agreed to resume lending if the former Soviet republic met some legislative conditions.

"We have reached an agreement of understanding which subsequently will lead to resumption of
financing," Richard Haas, head of the IMF's mission to Moldova, told a news conference in the
capital, Chisinau.

Haas said Moldova needed to adopt laws on bankruptcy and financial disclosure while the IMF would help the country, Europe's poorest, with its 2002 budget law.

The IMF froze its $142 million, three-year lending programme in February after the Communist
Party swept to power in a general election. Some Communist deputies had talked of scrapping
privatization plans, introducing protectionist trade tariffs and abandoning economic reforms demanded by the IMF.

But Haas said the IMF mission was pleased with the policies outlined over the last two weeks by
the newly elected government and the macroeconomic outlook was bright.

"Gross domestic product is set to grow by at least five percent this year and annual inflation to
go down to nine percent. Exports are increasing nicely, the current account is improving and the
exchange rate is stable," Haas said.

Haas said the IMF Board would consider Moldova's case in October or November.
If the IMF resumes lending, it will mark a major step forward for Communist President Vladimir
Voronin, who was elected on a wave of dissatisfaction with a decade of economic reform which has left many Moldovans in grinding poverty.

About 80 percent of the country's four million people live on less than a dollar a day in the
primarily agricultural country sandwiched between Ukraine and Romania.
Voronin said when elected he was keen to work with international lenders and other organizations.

The government has moved to meet the IMF's conditions, keen to secure the remainder of the
three-year loan. So far, Moldova has received only $24 million.
In July, the government announced plans to sell two electricity distribution companies and two
wine-making plants, meeting one of the IMF's key conditions on privatization.

The IMF's return is also likely to act as reassurance for foreign investors. Haas said it should
smooth the way to resume debt rescheduling talks with the Paris Club of creditor nations.
The economy is showing signs of recovery. Prime Minister Vasile Tarlev said last month gross
domestic product was expected to rise by seven percent this year after increasing 1.9 percent in 2000 and dropping 4.4 percent in 1999.

By Dmitry Chubashenko
Wednesday, 8 August 2001 13:45:15