Moldova & IMF IMF Activities Publications Press Releases

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Infotag's interview with Moldovan First Deputy Prime Minister Zinaida Grecianii

Q: How will Moldova's relations with international financial organizations be developing now that the IMF Executive Board have approved the new three-year arrangement for Moldova?

A: The new program of cooperation stipulates provision of an IMF credit for an amount of about US$118.2 million under the Poverty Reduction and Growth Facility (PRGF) for us. Last week, the International Monetary Fund had already transferred the first tranche, nearly US$17 million, from that credit to the National Bank of Moldova to underpin the country's currency reserve and payment balance.

The new program of cooperation with the IMF enabled us to sign an Agreement with the Paris Club creditors on rescheduling a certain part of our external arrears. However, in order to ensure not only a good start of that scenario but also of its further positive development, it is necessary to make efforts to fulfill the program, ensure economic stability, carry out projected structural reforms in agriculture, energy sector, social sphere, and to persistently improve business climate in the republic. For the first time ever, such program has been worked out by Moldovan governmental experts, and we are convinced the projected reforms are most adequate for this country at the present time.

As for relations with the International Monetary Fund, this fiscal year ending on June 20 the World Bank had approved 3 projects very important for Moldova, and financial assistance will exceed US$45 million, which is much more than what we have seen over last several years.

Presently, we are negotiating with the WB a new program. We hope the main negotiations will be completed by the end of next month, and, as far as we know, the World Bank is continuing the realization of new investment projects for Moldova.

Q: How do you assess the results of talks with the Paris Club and the accords reached concerning the rescheduling of the bilateral external arrears?

A: On the whole, they meet our expectations. The rescheduling of our foreign debts for 15-20 years, with a 5-10-year grace periods depending on the debt kind (financial assistance or commercial debt), has exactly coincided with a period when Moldova needs to invest heavily in infrastructure, production development, raising of the competitiveness of our goods for the sake of diversification of markets. The rescheduling concerned reduces the cost of debt servicing next 3 years to US$60 million from the initial US$150 million.

Q: A big part of the Government's debt is owed to multilateral creditors. Is the question of rescheduling the over-due debt to the World Bank is still topical? As is known, this debt is fairly big and difficult to serve. Before, suppositions were heard about a possible restructuring of World Bank credits into concessional credits against commercial interest rates...

A: As you could notice, the World Bank has lately been financing all the projects, approved for Moldova, proceeding from a 50:50 proportion, with a half of credits being concessional ones, and the other half - grants. That financing method could be regarded as kind of a restructuring. Besides, there exists a British initiative about repayments, with the Britain's Department for International Development (DFID) assistance, of parts of developing countries' debts to the World Bank. That initiative is being considered by the Dutch
Government, which has always backed Moldova in hard moments. It is not known yet what a final decision is going to be, and which part of the debt we will be asked to return - 10% or 12%, but in any case it will be good for us.

Besides this, the World Bank intends to return to direct financing of Moldova's State Budget. The credit to be aimed at Budget support will not be big -- US$30 million for 3 years, and we project to cover with this money only production expenditures, and, perhaps, a part of the money will be used for projects of investment in infrastructure. And under no circumstances shall this money be used for current consumption.

The new program of collaboration with the International Monetary Fund ensures to Moldova a real backing on the international arena. Potential donors' attitude to this republic is changing, and I guess we will be able to attract extra means from the State Budget for  realization of these projects, as well as, e.g., from the European Union which has promised funding for World Bank projects. By the way, we want to sign, before the end of this week, a memorandum of accords with potential donors - that all their means shall be transferred to the treasury in order to ensure transparency and efficiency of the using of this money.

Q: And, still, the bilateral debt owed to the Paris Club as well as to non-Club creditors has been only rescheduled, not annulled. May this mean that the Tarlev Government is loading the debt burden on successors' shoulders?

A: That would not be quite correct to guess so. Moldova is now at a crucial stage of its history. Reforms are going on in a correct direction, but they need to be deeper. We must make the economic growth sustainable.

We should reorient our exports, build up investment in the production sphere and in infrastructure. We also need to ease the pressure of debts on the State Budget. So, we shall not relax merely because the program of cooperation with the IMF has been in place or because the Paris Club creditors have rescheduled a part of our debt. We shall work on.

Back in 2000, the size of the country's external debt used to constitute 60% gross domestic product, and by the end of 2005 the figure had dropped to 25%. We have substantially diminished the external arrears with our own means, without external borrowings. We shall be further negotiating with each particular creditor, saving money, and reducing expenditures. All the new borrowings will be concessional credits intended for investment.
They are called to promote a sustainable economic growth, higher living standards, and the country's better paying capacity.

Q: The remittances made by Moldovan gastarbeiters from abroad are incomparably greater than the debts that can be rescheduled. Why not using this money for investment?

A: We are now working to provide incentives for the gastarbeiters to invest their savings into development, not into mere consumption, and we are considering tax privileges.

Q: When will Moldova cease to be a candidate within the Millennium Challenge initiative and become a country the Millennium funds recipient?

A: When Moldova became a candidate for receiving Millennium Challenges funds, there was only one 'gap' which we had failed to fill on the list of 16 indicators - we had not drawn up an anti-corruption plan by that time. Eventually we prepared that plan, heard the opinions of the civil society, the U.S. Embassy, the USAID, other partners. Last Saturday, we sent that plan to the Millennium Challenges Corporation.