Atoyan: Moldova Successfully Completed the Program with the IMF

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The IMF announced that its three-year program with Moldova, which ends on March 20, has been completed successfully. Chief of the IMF mission for Moldova Ruben Atoyan answered many questions related to the program, reports. -  Mr Atoyan, the IMF announced that its three-year program with Moldova, ending on March 20, has been broadly successful in achieving its objectives. Could you please name the areas where the biggest progress was achieved? Ruben Atoyan: Indeed, the program has been successful. This is very much commendable, especially given the fact that the provisions of the program have been implemented by three different governments. I must say that this is not something very common for countries with a frequent change of government. First of all, in the past three years, we have seen significant progress in the banking sector and in strengthening the financial sector governance. Today, all large Moldovan banks have fit-and-proper and transparent ownership and all banks have good profitability and liquidity indicators.Non-performing loans have been on a declining trajectory, while banking sector supervision and regulation have been significantly strengthened. This is very important for the banking sector and for the macro-financial stability of the country in general. - Yet, there must be areas where not everything went as planned. What are these areas? Ruben Atoyan: Indeed, I would like to say that not everything that we planned at the beginning of the program was achieved. First of all, I would like to say that the lack of progress in investigating the 1 billion dollar bank fraud and the slow recovery of the stolen assets has largely disappointed us. Progress in the business climate, market competition, and the energy sector reforms also have not been as advanced as we hoped at the beginning of the program. I would also like to say that despite the progress achieved in the financial and banking sector under the IMF-supported program, we see weaknesses in the oversight and regulation of the non-banking financial sector. This has led to visible build up of risks in that sector. Yet, not achieving all the objectives of the program is not something very unusual. Overall, the program has been broadly successful and achieved its key objectives. - What could you say about the activities of the National Bank of Moldova (NBM) during this period? Ruben Atoyan: Independence of the central bank is crucial for any country. From the legal point of view, the NBM is independent. Yet, over the last one and a half years we have sometimes seen Moldovan politicians from across the political spectrum speaking on behalf of the National Bank or “advising” it on what needs to be done. This proves that there is still room for strengthening the independence of the National Bank. In my view, the notion that safeguarding the National Bank’s independence is key for preserving hard-won gains in banking sector rehabilitation is yet to be fully embraced by political elites in Moldova. In this context, I would like to reiterate that NBM’s independence is critical for its ability to deliver on its mandates of maintaining price and financial sector stability. - The Moldovan government has already expressed interest in starting negotiating a new program with the IMF. What three main conditions should Moldova meet in order to get a new program with the IMF? Rubem Atoyan: Indeed, the government of Moldova has already expressed interest in a new program with the IMF. A new program will help the country to address governance and institutional vulnerabilities. I cannot speak about conditions now as these are subject to negotiations between Moldovan authorities and IMF staff. But in terms of priorities, I would recommend to the government and - I understand that the government is very much receptive to these ideas - to strengthen the anti-corruption framework, strengthen the rule of law, strengthen fiscal institutions and anti-money laundering framework, launch comprehensive and ambitious reforms of state-owned enterprises. And also strengthen supervisory and regulatory frameworks of the non-bank financial sector. These would be broadly reform areas which we will be happy to support by policy advice and financing in the context of a new program. -What could the duration of the new program be? Ruben Atoyan: From our point of view, a new three-year program is appropriate given the complexity of the issues that the new program will address and the time needed to make progress in these areas. We understand what the government shares the same opinion. - Could Moldova rely on some additional IMF support to deal with the coronavirus crisis? Ruben Atoyan: Moldova successfully completed the program with the IMF. It enters the coronavirus crisis having strong fiscal, financial and external buffers. Unfortunately, not all countries affected by coronavirus are in the same situation. We are in constant dialogue with the authorities in Chisinau on a wide range of possible responses in fiscal, financial and operational areas and we are trying to advise the authorities to design appropriate policy response to cope with this crisis. Advance planning and coordination are the overarching themes of our policy advice. In parallel, we stand ready to provide emergency financing under specialized lending instruments designed to help countries to overcome emergencies such as pandemics or natural disasters. In the case of Moldova, these loans—potentially in the amount of up to $118 million and based on concessional financing—can be disbursed very quickly to assist in implementing policies to mitigate negative effects of the ongoing global pandemic. - When do you plan to pay a new visit to Chisinau? Ruben Atoyan: Right now IMF staff is instructed to suspend all international travel because of coronavirus pandemic. But I would like to tell you that my day is full of video- and teleconferences with the Moldovan authorities. While at this point we do not have a specific date of our next mission to Chisinau, I can assure you that our policy dialogue does not suffer because we are not visiting Chisinau. We stand ready to help our member countries, including Moldova, to overcome current challenges by mobilizing necessary financing, providing policy advice, and facilitating coordination of the crisis response across our 189-country membership.