Moldova & IMF IMF Activities Publications Press Releases

                                                                                                       Limba romana                        

27 September 2006


Capital Market. A new IMF mission is coming to Moldova soon. What would be the subjects on the agenda of the next mission to Moldova?

Johan Mathisen. The main task of the IMF mission, that will visit Chişinău on October 11-25, is to take stock of the past performance of the Government and outlook for 2007. We will also attempt to come to an agreement on macro projections for 2007 and associated targets. On the structural side, we expect that the focus of the program will continue to be on three areas: continued financial sector reformódesigned to strengthen the NBM and reduce government interference in the financial sector; improved fiscal managementóto be achieved through modernizing tax administration aimed at reducing the burden to comply with existing regulations and updating the practices relating to public financed management and relations with the NBM; and structural reforms designed to better define the role of the governmentís in the economy, clearly important here would be the draft privatization law, as well as continuous improved management of State enterprises, for instance the accounts of this enterprises will be reported to Parliament , and in general reforms designed to improve the business environment.

The gas price doubling and extensive wine crises represented shocks for the national income, July mission concluded. Thus, we expect growth to be lower than earlier envisaged and inflation somewhat higher than in the program. A key objective of the October mission will be to help or to discuss with the authorities how to best adjust or come up with the ideal macroeconomic framework in the face of these macroeconomic shocks. Wine ban, gas prices, Romania/Bulgaria joining EU, implies that we all have to do more: the international community, the IMF as well as the government. On our part, would be a considering to increase the size of our loan, in order to ensure macro economic stability in the country.

C.M. What should be the policies on the site of Government that will help the country overcome these macroeconomic difficulties?

J.M. Itís a question of financing and reducing the aggregate demand correspondingly. Either we get external resources that can help overset it, or to adjust fiscal and monetary policies. What we are looking to find here is a combination between higher external financing and tighter monetary and fiscal policies. All these policies should bring the macroeconomic stability, in other words, stable inflation and exchange rate.

C.M. What was the reaction of the Government to these recommendations?

J.M. We consider our recommendations be the best international practices to handle these kind of shocks. In this regard, itís important to bear in mind that Moldova has the highest inflation in the region, and I think the Government agrees with us that inflation should be reduced at the single digit level, because it has implications when it comes to poverty reduction, itís substantially a ďtax on the poorĒ. Clearly, the design of the policies would have to help achieve the inflation target.

C.M. Last IMF statements were very positive and supportive for Moldovan government, aren't you afraid that if this recommendation would not be fulfilled, the relations between IMF and Moldovan Government would again deteriorate?

J.M. From my personal experience I can assert that I have seen a clear will on the Governmentís side to not only put in place this Program but also to keep it on-track. I worked in PRGF supporting projects for almost a decade, and itís clearly the way itís structured or organized itís the best I personally seen. The government team has taken the challenge to continue to draft the program, which is a good sign that clearly shows of course a strong will to not only design the best program in their view but also keep it on - track.

Looking ahead, we are convinced that our relations will continue to deepen and develop appropriately. We may have minor differences of view from time to time: that's normal in a relationship like this. What is important is the Moldovan authorities' commitment to economic reforms that could position Moldova to take advantage of deeper integration in European institutions, and as long as Moldova's authorities remain committed to harmonization of institutions with best European and international best practice, we believe the relations with the Fund will be excellent.

Vitalie Condratchi