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IMF Executive Board Concludes 2023 Article IV Consultation and Fourth Reviews Under the Extended Credit Facility and Extended Fund Facility Arrangements and Approves Request for Arrangement Under the Resilience and Sustainability Facility

Press Release No. 23/428
December 7, 2023
 
  • The IMF Executive Board completed the fourth review under the Extended Credit Facility/Extended Fund Facility (ECF/EFF) arrangements with Moldova, allowing for an immediate disbursement of about US$95 million (SDR 70.95 million). ECF/EFF implementation remains strong, with key reforms in fiscal governance, financial sector oversight, and the rule of law.
  • The Executive Board also approved an arrangement for Moldova under the Resilience and Sustainability Facility (RSF), in an amount equivalent to US$173 million (SDR 129.375 million). The RSF will support Moldova’s efforts to strengthen resilience against climate shocks, support energy sector reforms, enhance domestic financial sector preparedness, and mobilize sustainable finance.
  • Moldova faces ongoing challenges related to spillovers from Russia’s war in Ukraine. Policies are appropriately focused on crisis mitigation and recovery; as risks abate, policies should align with long-term development goals while ensuring fiscal sustainability. Ongoing institutional and policy reforms will contribute to boosting medium-term, sustainable growth.


Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the fourth review under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements[1] for the Republic of Moldova.[2] This allows for the immediate disbursement of SDR 70.95 million (about US$ 95 million), usable for budget support, and brings Moldova’s total disbursements under the blended ECF/EFF arrangements to SDR 348.5 million (about US$ 466 million). The Executive Board also approved an extension of the ECF/EFF arrangements by 6 months until October 19, 2025. The Board also approved a new arrangement Under the Resilience and Sustainability Facility (RSF) of SDR 129.375 million (about US$173 million). The RSF will support Moldova’s efforts to strengthen resilience against climate shocks, support energy sector reforms, enhance domestic financial sector preparedness, and mobilize sustainable finance.

Moldova continues to grapple with persistent challenges from spillovers of Russia’s war in Ukraine. ECF/EFF implementation remains strong despite these challenges, with completion of important reforms related to fiscal governance, financial sector oversight, and the rule of law. Contingency plans have alleviated the effects of the energy crisis, with progress in diversifying energy sources and enhancing protection for the vulnerable population during winter months. Inflation decelerated rapidly due to timely monetary responses and declining food and fuel prices. A modest recovery is expected in 2023, supported by agriculture, increased consumption, and investment. Near-term policy priorities are appropriately focused on mitigating crisis impacts and supporting recovery. As risks abate, policies should be increasingly geared to long-term development goals while preserving fiscal sustainability. The effective implementation of the ECF/EFF and RSF reforms, together with strengthening the labor market and enhancing productivity will support long-term, sustainable development, and convergence toward EU income levels.

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for their strong program ownership and performance under the ECF/EFF arrangements and considered that the new RSF arrangement will help strengthen climate resilience efforts. Directors cautioned that despite the favorable outlook, Moldova continues to face significant headwinds from multiple crises and large downside risks, including from spillovers from Russia’s war in Ukraine and energy shocks. They encouraged continued focus on mitigating shocks, aiding the recovery, and supporting sustainable, green growth, and EU accession efforts.

Directors agreed that fiscal policy should remain focused on mitigating the impact of the multiple crises, supporting the recovery, and advancing longer‑term reforms. They underscore that near‑term fiscal policy should continue to support the most vulnerable and safeguard energy security. Over the medium term, fiscal consolidation, while addressing development needs, is important to preserve fiscal and debt sustainability. Directors welcomed the authorities’ plans to enhance revenue mobilization and improve expenditure quality and efficiency. They recommended steps to enhance public financial management and address recurrent budget under‑execution.

Directors recognized the central bank’s strong, timely response to help mitigate high inflation and recommended that monetary policy remain data‑driven and forward‑looking. Directors highlighted the need to continue to reduce high reserve requirements to support bank liquidity and credit intermediation. They emphasized that further progress on strengthening the independence of the central bank will preserve policy credibility and effectiveness. Directors underscored the importance of maintaining financial sector stability, enhancing oversight, and improving financial inclusion.

Directors recognized recent reforms to strengthen governance, address high‑level corruption and bolster the rule of law. Important measures include strengthening the labor market and enhancing the efficiency of state‑owned enterprises. Directors emphasized that maintaining strong momentum on these reforms is crucial to contain fiscal risks, foster trust in public institutions, and improve the business environment. They noted that the RSF will support Moldova’s efforts to enhance resilience to climate shocks, implement energy sector reforms, and ensure mobilization of sustainable finance.

It is expected that the next Article IV consultation with Republic of Moldova will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.

[1] Arrangements under the ECF provide financial assistance that is more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis (e.g., protracted balance of payments problems). Those under the EFF provide assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position.

[2] The ECF/EFF arrangements were approved in December 2021 (Press Release) and augmented in May 2022 to increase total access under the arrangements to SDR 594.26 million (Press Release).
 
Table 1. Moldova: Selected Economic Indicators, 2018-2028 1/                  
  2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
          Est. Proj. Proj. Proj. Proj. Proj. Proj.
  (Percent change, unless otherwise indicated)
Real sector indicators                      
Gross domestic product                      
Real growth rate 4.1 3.6 -8.3 13.9 -5 2 3.9 4.8 5 5 5
Demand 8.5 4.1 -7.5 16.6 -5.1 2.3 4.2 5 5.3 5.4 5.2
Consumption 3.2 3.7 -7.9 14.8 -1.4 2.4 3.5 4.4 4.3 4.4 4.5
   Private -1.5 -0.9 2.9 17.4 -3.3 1.8 3 4 4 4.2 4.3
   Public 15.7 47.6 16.1 3 7.5 6 6 6.4 5.5 5.5 5.5
Gross fixed capital formation 14.4 12 5.6 1.9 -6.4 3.9 5.8 7.2 7.3 7.5 7.7
Net Exports of goods and services -14.3 -3.8 2.8 -25.6 5.3 -3.4 -5.2 -6 -6.7 -6.9 -6.1
Exports of goods and services 4.1 8.2 -14.9 17.5 26.8 4.7 6.7 7.3 7.1 7 7
Imports of goods and services 8.4 6.2 -9.5 21.2 11.7 4.2 6.1 6.8 6.9 6.9 6.7
Nominal GDP (billions of Moldovan lei) 189.1 206.3 199.7 242.1 275.6 312 342 378.1 418.8 463.9 513.9
Nominal GDP (billions of U.S. dollars) 11.3 11.7 11.5 13.7 14.6 16 16.3 17.8 19.5 21.6 23.4
Consumer price index (average) 3.6 4.8 3.8 5.1 28.6 13.4 5 5 5 5 5
Consumer price index (end of period) 0.9 7.5 0.4 13.9 30.2 5 5 5 5 5 5
GDP deflator 3.2 5.3 5.6 6.4 19.8 11 5.5 5.5 5.5 5.5 5.5
Average monthly wage (Moldovan lei) 6443 7,356 8,104 8,619 9,328 10,775 11,750 12,925 14,225 14,225 14,225
Average monthly wage (U.S. dollars) 383 419 468 488 493 553 560 610 662 662 647
Unemployment rate (annual average, percent) 3.1 5.1 3.8 3.3 4.6 4.9 4.2 4.2 4.2 4.2 4.2
  (Percent of GDP)
Saving-investment balance                      
Foreign saving 10.8 9.5 7.8 12.4 17.2 12.2 11.4 10.4 9.7 9.6 9.5
National saving 15.8 15.6 14.9 13.3 7.4 10.8 12.1 13.3 14.7 15.2 15.7
Private 12.9 13.4 16.2 12.8 6.7 11.6 13.4 13.6 14.3 14.3 14.1
Public 2.9 2.2 -1.3 0.6 0.7 -0.8 -1.3 -0.3 0.4 0.9 1.6
Gross investment 26.6 25.1 22.7 25.8 24.6 23 23.5 23.7 24.3 24.8 25.1
Private 23 21.5 19.2 22.4 20.9 20 20.4 20.3 20.6 20.8 20.9
Public 3.6 3.6 3.5 3.3 3.7 2.9 3.1 3.4 3.7 4 4.2
Fiscal indicators (general government)                      
Primary balance -0.2 -0.8 -4.7 -2 -2.3 -4.4 -3.5 -2.8 -2.6 -2.3 -1.8
Overall balance -0.9 -1.5 -5.3 -2.6 -5.1 -5 -4.6 -3.8 -3.4 -3.1 -2.6
Stock of public and publicly guaranteed debt 30.4 28.1 35.6 34.6 36.4 37.1 38.2 37.6 36.9 35 33
  (Percent change, unless otherwise indicated)
Financial indicators                      
Broad money (M3)  7.8 8.2 19.6 11.3 5.2 15.2 … … … … …
Velocity (GDP/end-period M3; ratio) 2.3 2.3 1.9 2 2.2 2.1 … … … … …
Reserve money 17.7 7.6 18.8 3.4 30.3 9.8 … … … … …
Credit to the economy 4.1 11.5 10.3 21 8.9 11.3 … … … … …
Credit to the economy, percent of GDP 21 21.4 24.4 24.4 23.3 22.9 … … … … …
  (Millions of U.S. dollars, unless otherwise indicated)
External sector indicators 2/                      
Current account balance -1212 -1117 -901 -1699 -2498 -1951 -1853 -1849 -1882 -2082 -2210
Current account balance (percent of GDP) -10.8 -9.5 -7.8 -12.4 -17.2 -12.2 -11.4 -10.4 -9.7 -9.6 -9.5
Remittances and compensation of employees (net) 1,669 1,729 1,669 1,826 1,519 1,793 1,937 2,092 2,259 2,440 2,635
Gross official reserves 3/ 2,995 3,060 3,784 3,902 4,474 4,714 5,140 5,224 5,407 5,613 5,887
Gross official reserves (months of imports) 5.4 6.2 5.7 4.6 5.2 5.3 5.4 5.2 4.9 4.7 4.7
Exchange rate (Moldovan lei per USD, period average) 16.8 17.6 17.3 17.7 18.9 … … … … …  
Exchange rate (Moldovan lei per USD, end of period) 17.1 17.2 17.2 17.7 19.2 … … … … …  
Real effective exchange rate (average, percent change) 8.9 2.1 5.1 -1.6 11.3 … … … … …  
External debt (percent of GDP) 4/ 67.6 61.9 70 63.3 66.2 67.3 71.8 71.2 69.8 67.8 66.8
Debt service (percent of exports of goods and services) 14.7 13.4 15.8 11.9 8.8 10.9 12.2 12.4 13.2 12.3 8.1
Sources: Moldovan authorities; and IMF staff estimates. 
1/ Data exclude Transnistria.                      
2/ Balance of Payments (BOP) classification is revised in line with the Sixth Balance of Payments Manual (BPM6). Review columns reflect BOP according to BPM5 classification.
3/ Includes SDR allocation in 2021 (about US$236 million). 
4/ Includes private and public and publicly guaranteed debt. 
Note: 2014-2020 GDP data recently revised by the Moldovan National Bureau of Statics, following an IMF TA.

 

IMF Communications Department
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PRESS OFFICER: MEERA LOUIS
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