Moldova & IMF IMF Activities Publications Press Releases

Limba romana                                                                     Russian

ECONOMY COMMENTS October 26 2004


Renewal of External Financing Is Not Under Discussion. Not Yet

Last week in Chisinau two press-conferences dedicated to the matters of cooperation of Moldova with international financial institutions took place. In particular, resident representative of the International Monetary Fund informed the journalists that next IMF mission is coming to Moldova with the aim of evaluating the economic situation of the country as well as the course of reforms and the perspectives of implementation of the Economic Growth and Poverty Reduction Strategy Paper. International organizations will not discuss the issue of renewal of financing for Moldova, however IMF representative mentioned that the results received in the process of the mission's work will be presented in a report for consideration of the Board of Directors of IMF at the beginning of the next year.

Already after the presentation of the report it will be possible to discuss thematically the perspectives of collaboration between IMF and Moldova, including the renewal of financing. At the same time, Edgardo Ruggiero reminded once again that the Monetary Fund assigns resources to replenish monetary reserves of the country and not to invest into development as it is in the case of the World Bank.

He also mentioned that the discussion of the Economic Growth and Poverty Reduction Strategy Paper by the Board of Directors of IMF and WB planned for November will hardly influence the situation, because the Strategy represents a document of the Government of Moldova, whereas international financial institutions can approve and support the document, but not adopt it. In his opinion, Moldova could have started the implementation of the Strategy half a year ago. Rudgiero emphasized that the World Bank and other donor organizations will support the implementation of the Strategy. In particular, this applies to the project in the social and environment fields, treatment works and water supply.

Also, last week, Paul Bermingham, the new Director of the World Bank for the country, who replaced Luco Barbone in this position in the beginning of October, and Shigeo Katsu, the Vice-President of WB for Europe and Central Asia, were with a working visit to Moldova. At the final press-conference they informed the public that on the 14th of December, the Board of Directors of the World Bank will discuss its Country Assistance Strategy for Moldova for 2005-2008. The document will be based on the Economic Growth and Poverty Reduction Strategy Paper developed by the Government of Moldova with an active involvement of the civil society.

The high-level officials praised the quality of the document and urged the authorities to put it into action more actively. As it is known, the World Bank plans to support the Country Assistance Strategy for Moldova and this assistance may reach around 90 million dollars within the next three years. It is interesting that one of the conditions for providing the financing is the Government's commitment to the strategy, as well as readiness of Moldovan legislators to support the document.

The amount of financing the Strategy may increase by 45 million dollars, in case the Strategy receives all the necessary support of Moldovan authorities at all levels and is put into practice consequently, without "one step forward - two steps backward" principle that has become very usual for Moldova.

Among the priorities, WB representatives mentioned projects in social sphere, fighting AIDS program, environmental protection and improving public finances management, as well as the project on competitiveness and improving business climate.

In case the framework document of the WB Country Assistance Strategy is approved by the Board of Directors by mid-December, the decisions on financing certain projects will be taken separately for each project. He also mentioned that the Country Assistance Strategy is a live document, and nobody should be surprised if it is amended repeatedly in the process of its implementation.

Both representatives of the World Bank and the Monetary Fund mentioned that one of the biggest problems regarding the implementation of the Economic Growth and Poverty Reduction Strategy Paper is the lack of institutions and specialists throughout the country, without which the implementation of the Strategy is impossible, as well as the necessity for capacity building.

Edgardo Ruggiero emphasized that if Moldovan Government applies for technical assistance - assistance from experts who have experience in the implementation of similar projects on poverty reduction in other countries, it will get such assistance. In his opinion, Moldova needs both financial and expert assistance.

In his turn, Shigeo Katsu stressed the importance of NGO development throughout the entire country, because they are the ones that can take the responsibility for the implementation of various projects within the Strategy, especially those directly related to combating poverty locally. He also pointed out that the World Bank is ready to continue to providing such assistance to our country.

As for the possibility of the renewal of financing from international financial institutions within their regular programs, it depends solely on Moldova and its readiness to follow the well-known principles. Meanwhile, international organizations note positively the economic growth of the republic, but at the same time they mention that it is not the result of governmental efforts to implement reforms and is not of a long-term nature.

As Edgardo Ruggiero accentuated, the economic growth of the country in based not on investments, which would prove its stability and quality, but on the growth of consumption, both external - in Russia and CIS countries, and internal, as a result of transfers made by Moldovans who work abroad. According to statistics, direct foreign investments into economy make $69 million, i.e. only 24% of the amount of money transferred by Moldovan workers from abroad.

The opinion of experts is that Moldova needs an institutional reform to make the country more attractive for foreign investments. The importance of trade liberalization and removal of trade barriers, including secret ones, was stressed once again. As an example, Mr. Ruggiero mentioned the unofficial ban on export of scrap metal and sunflower seeds. Shigeo Katsu, in his turn, mentioned that some aspects of the economic policy of the authorities "raise concern and undermine trust". It applies to agriculture, power engineering and business climate, as well as "the existing gap between the adopted legislation and its implementation in practice".

As Edgardo Ruggiero mentioned, another task of the mission will be to identify inefficient spending of the government that above all lead to corruption. At the press-conference, he refused to clarify what kind of spending he meant, but as it is know, Moldova is in the beginning of the election period, thus, it would be naive to expect the authorities to follow IMF requirements, as well as to expect a serious discussion about the renewal of financing from international financing institutions until the end of elections.