REUTERS:
Interview with Hassan Al-Atrash, Resident Representative of the
International Monetary Fund to Moldova (by Dmitry Chubashenko)

REFORM OR JEOPARDISE FUNDING, IMF WARNS MOLDOVA

CHISINAU, May 15 (Reuters) - The IMF on Tuesday urged the Communist rulers of Moldova, who won back power in the impoverished former Soviet state three months ago, to press ahead with economic reforms or risk jeopardising vital funding.

"Relations (between Moldova and the International Monetary Fund) are currently at a critical
juncture," Hassan al Atrash, IMF resident representative to Moldova, told Reuters.

"The policies that are to be adopted in the coming weeks and months will basically determine
whether the Fund will provide extra financing."

A February general election in Moldova, a tiny agriculture-dependent state of 4.4 million people between Romania and Ukraine, gave Communists their first return to power in the former Soviet Union for a decade.

The IMF, which resumed relations with Chisinau in 2000, last year approved a three-year $142 million lending programme to cut poverty and boost growth. The country has so far received two tranches worth a total of $24 million.

But the landslide victory of the Communists, giving them control of parliament, the government
and the presidency, put a question mark over the future of those reforms, and the funding.

The Communists pledged to work with the IMF but the new government has unveiled an economic programme calling for trade tariffs on imports to protect domestic producers.
The sell-off of state companies -- a key precondition for IMF financing -- has also run into
some opposition among Communist members of parliament.

"Privatisation is something that continues to be important to us. Privatisation should be done
in a transparent way in a competitive tender for cash rather than through writing off questionable
debt," al Atrash said in an interview.

"I hope that the policies that the new authorities will implement would be consistent with the
memorandum that has been agreed last year," he said during a visit by IMF officials to assess the new government's policies.

IMF CONCERNED ABOUT THE POOR

Moldova pledged to sell a majority stake in its national telecoms company and privatise two wine producers, regarded as attractive to outside investors. In addition, financial and business
legislation reforms were promised.

"The policies that are to be adopted in the coming weeks and months may impact disbursement of IMF financing for the remainder of the year," al Atrash said.
He added that the IMF expected certain measures to be in place before it considered resuming
lending to Moldova.

Data from the European Bank for Reconstruction and Development [EBRD.UL] shows Moldova was the only former Soviet republic not to achieve economic growth last year.
However, Moldovan official figures show gross domestic product expanded 1.9 percent last year and predict expansion of five percent in 2001.

Al Atrash said it was crucial for ordinary Moldovans, many of whom live on less than a dollar a
day, that the government secure IMF funds.

"If the financing is not there, one of two things is to happen -- either the country will
increase domestic arrears, or finance its additional expenditure from the National Bank which would result in inflation," he said.
"And inflation is the worst tax on the poor."

Tuesday, 15 May 2001 11:35:40