Moldova & IMF IMF Activities Publications Press Releases

Limba romana                                                                         Russian

Economic & Financial News Agency - Daily Electronic Magazine

Friday, July 11, 2003


Edgardo Ruggiero: "Visit of the IMF mission is a chance of success, but it does not guarantee the success"

The permanent representative of the International Monetary Fund (IMF) to Moldova Edgardo Ruggiero expressed Wednesday at the press conference his optimistic opinion that the visit of the IMF evaluating mission that will be in Chisinau on June 5-18 will successfully be completed. That will mean that the government and the IMF will come to a common opinion in the negotiations on every issue, on which the agreement was not reached yet. The IMF recommendations for Moldova were the same: to adopt the law on the pre-shipment inspection in the version proposed by the IMF; to withdraw restrictions on some categories of commodities and to alter the Law on the 2003 budget.

Should the mission give a positive estimation of the latest successes of the republic, Moldova will receive its next tranch within the framework of the Economic Development and Poverty Reduction Strategy. (The overall budget of the strategy is estimated at $142 million, divided into 12 tranches, about $12.3 million each. Moldova has already obtained three tranches from the IMF). It is still unclear how realizable it is. The only thing is clear till now (since October of the previous year) no well-defined agreements were registered between the parties.

The working-out of the new draft law on the pre-shipment inspection by the government, that according to Edgardo Ruggiero is in line with both interests of the government and the IMF can be considered the only success. Edgardo Ruggiero maintained that he already saw the new version of the law "initial requirements by the IMF and clauses that worried the government are considered in it". Despite the fact that, according to the IMF representative, the issue on inspection was exaggerated, still the decision on financing cannot be made without it.

The pre-shipment inspection is the only IMF recommendation met by Moldova, if not taking into account the statements by Edgardo Ruggiero on the fact that "budget receipts have increased, what means that everything is in order whether on the customs, or at the tax inspectorate" or "the National Bank of Moldova led by Talmaci is the good example of the country's national bank, while the Moldovan Ministry of Finance is a good example of the control over expenditures". However, as we know "good guy is not profession, while such abstract conclusions cannot be filed to the case". The authorities fulfilled some concrete recommendations quite on the contrary.

The government was suggested to alter the Law on the 2003 budget to put it in line with variables agreed with the IMF. The Cabinet promised to the previous mission (March 2003) to perform the alterations. However, in fact, it worked out the Law on veterans that, by the way, is not financially grounded. The Cabinet also took the decision to reduce the tariffs on the telephone installation and rental fee for some categories of the socially vulnerable layers of society, without having agreed with the National Telecommunication and Informantics Regulation Agency and contrary to the Tariff Rebalancing Plan.The pension amount was increased, what goes in the conrary to the agreement with the WB and IMF on the establishment of the stable pension fund, the scale of the pension depending on the individual deduction of each pensioner and pension indication.

In the current situation, Edgardo Ruggiero beleives, it will be expedient "to recalculate the budget of the state social insurance for some years in advance, as the decisions taken today may have their impact for some other years in future".

The government was suggested to withdraw exporting restrictions. It was made pro forma, however Edgardo Ruggiero does not rule out that restrictions withdrawn on paper still exist in fact.

The government "was advised" to follow the policy of stimulating foreign and national investments. However, the case with the group of Union Fenosa in Moldova shows us the contrary things. According to the IMF representative, the second example that goes in the contrary to the liability is the project of amendments to the Law on the entrepreneur's patent, that envisaged the prohibition of the retailed trade in the street on the basis of the entrepreneur's patent and new reporting rules. "It won't solve the problems, however it will aggravate the situation of the representatives of the small business", thus Edgardo Ruggiero commented on the project. In this context, he also touched upon the issue on the certification of origin, in particular, the problem when the certificates are issued on the production exported to Europe that was supposedly produced in Moldova, while in fact it was imported to our country from other countries. He referred sugar and unprocessed leather to such categories.

The government was advised last year not to hurry to introduce the Compulsory Medical Insurance (CMI), but it ambitiously insisted on the concrete dates of its introduction, and has already delayed them twice. First, it occurred on the president's initiative (the CMI introduction was postponed from January 1, 2003 till July 1, 2003). Commenting on the current decision of the government concerning the postponement of the CMI introduction till January 1, 2004, Edgardo Ruggiero noted that first the government should have approved a concrete budget of expenditures, required for introduction of the CMI.

On the whole, since the end of April till the middle of May, the government took a number of decisions that led to an increase in the budget expenditures, Edgardo Ruggiero believes. He maintains that for example return to the territorial-administrative division into regions will cause large expenditures: "the new region will at least require telephone, the repair of the building, new seals and a car for the Mayor". In fact, these are real expenditures. In the IMF opinion, the expenditures will be rather high, while the preliminary budget of expenditures presented by the government is ungrounded.

It does not envisage a fixed number of state units in the new local administration. If the government was calculating till now the saved funds due to elimination of judets, now it will have to seriously calculate expenditures on maintaining and support of new regions.

Edgardo Ruggiero unambiguously said this, and, in his words, "the IMF already carries out interesting debates on the issue with the government". In fact, Marta Castello-Branco once commented on the reform: "Is the reform a priority for Moldova in its process of the poverty reduction?". Edgardo Ruggiero had a more concrete opinion on the issue: "Decentralization on places means when services become closer to the population, however, I think, ten judets are rather enough for such a small country as Moldova. Still, it is the government's responsibility to decide, not ours".

Edgardo Ruggiero expressed his delight by the fact that the government so easily takes the decision that can negatively affect the budget in the medium-term period. In that case, in his opinion, Moldova will demand foreign financing. While the relevant decision depends on the conclusions made by IMF mission, on what, in its turn, depend financing decisions to be made by other international financial organizations.

In other words, according to the pessimistic prognosis, the government will fail to reach an agreement with the mission, and Moldova will have no money this year. According to optimistic prognosis, money will be received by the republic, but not earlier than in July of the current year. In any case Edgardo Ruggiero believes the visit of the mission is a chance of success, but it does not guarantee the success, though the fact of the arrival of the mission in Chisinau is "an optimistic signal".