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IMF Executive Board Completes Second Review Under the Extended Credit Facility and the Extended Fund Facility Arrangements with Moldova, Approves US$79 Million Disbursement

Press Release 11/119
April 7, 2011


The Executive Board of the International Monetary Fund (IMF) had completed the second review of Moldova's economic performance under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) arrangements. The blended financing arrangements under the ECF and the EFF for an amount equivalent to SDR 369.6 million (about US$587 million) were approved on January 29, 2010 (see Press Release No.10/21). The completion of the second reviews makes an amount equivalent to SDR 50 million (about US$79 million) immediately available for the authorities. The Executive Board also approved the authorities’ request for a waiver of applicability of the end-March 2011 performance criteria under the extended arrangement due to the unavailability of the information necessary to assess the observance of the criteria.

After the Executive Board's discussion, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, said:

“Moldova’s economy has recovered rapidly from the 2009 recession and the outlook is encouraging. The authorities are making good progress toward reestablishing macroeconomic stability, promoting balanced growth, and reducing poverty in the context of the Fund-supported program.

“The program is on track to restore fiscal sustainability by 2012 as planned. Building on the strong performance in 2010, the budget for 2011 appropriately advances fiscal consolidation by reducing current outlays while increasing public investment and priority social spending. Over the medium term, scaling back the oversized public sector will be key to maintaining a sound fiscal position. The planned expansion of targeted social assistance will enhance protection of the most vulnerable and help reduce poverty further.

“While inflation has declined, the economy’s strong rebound warrants a shift in the monetary stance from supporting the recovery to addressing inflation risks. The recent monetary policy tightening has been appropriate. Further tightening should be considered if the inflation outlook deteriorates and expectations are at risk of being destabilized.

“Conditions in the financial sector have improved with nonperforming loans declining and bank profitability rising. Ongoing reforms to consolidate financial stability include improvements in crisis preparedness and debt resolution frameworks.

“Further efforts are needed to improve the business climate and promote exports. Trade barriers hinder economic development and need to be removed as soon as conditions permit. Comprehensive reforms are needed to place the energy sector on a financially sustainable footing. The planned divestment of state enterprises should help improve efficiency and attract foreign investments”.