Moldova & IMF IMF Activities Publications Press Releases

                                                                          In Russian language

Weekly Newspaper "Chisinau Observer"

Issue No. 40 - Thursday, November 13, 2003

IMF ready to gove more freedom of action to Moldova

The day before yesterday, the IMF experts headed by Mr. David Owen, presented to the press their findings about the state of Moldovan economy. The view of almost two week IMF mission is quite different from the victorious statements of the government.

A visit of such mission is not an extraordinary event. The IMF experts come to our country every year to “review the developments in the economy in the course of the year.” Notwithstanding the common nature of this mission, a special attention was drawn to the visit of David Owen, as it was made in the context of absence of external financing and not simple relationship between the Moldovan government and international financial institutions.

David Owen began his speech with a spoonful of honey: “First, we are happy to see notable economic growth the third year in a row. There are also some positive signs in the field of private investments.” However, “reviewing the causes of this growth, we concluded that it is mainly resulted by remittances from Moldovan people working abroad and wage increases. This leads to significant increase of inflation that reached 17%.” This raises mission’s concerns: “how realistic it is to maintain the existing growth pace? And whether it would be possible to improve the business environment so that local firms could produce more goods and services?”

Further, David Owen said that “we welcome the measures taken by the NBM to monitor and contain inflation. Actions need to be taken to contain the inflation and if the remittances will grow, the NBM will have to tighten the monetary policy.”

According to the IMF representative, fighting inflation will be successful only if Moldova will promote a “tight fiscal policy in order to support the NBM actions. In this regard, it is necessary to work on the 2004 draft budget because it has financing gaps. In our opinion, the projections of donor grants and privatization proceeds are over-estimated.” David Owen pointed out that the government proposal to eliminate some tax exemptions were defeated in the parliament, “some measures need to be taken in order to close the budget deficit gap and ensure payments on external credits servicing.

David Owen did not pass over the subject of business climate. “From discussions with many economic agents, we concluded that the business climate is poor and does not contribute to the economic growth.” Therefore, while meeting with the government, “we discussed the measures that need to be taken in four fields. First, it is necessary to fight corruption. Second, it is necessary to put an end to government interference in the market, i.e. pricing decisions and importing constraints. Third, we want to see the government committed to accelerate the privatization process. Also, it is very important to liberalize the trade regime and not use import tariffs to support some economic agents.”

The main question that interested the journalists was if Moldova will be able to live without the IMF money? “There is no doubt that Moldova needs external financing in order to solve budget problems and meet financial commitments,” answered the chief of IMF mission.

However, the possibilities for resuming crediting by the IMF are remote. “Finally, I would like to say what the government needs to do in order to resume talks on the new program. If we look at the relationship with the IMF during the last ten years, we can note that the programs were not fulfilled in full. The reason for that is lack of government ownership of these programs.” Therefore, from now on, the government shall take the lead and develop its own programs, economic growth and poverty reduction strategy. We are ready to cooperate in the development of the strategy paper.” If this document will be good and supported by concrete actions of the government, this will trigger the discussion of the new program with the IMF.

Alexey Shkolnikov