Head of the IMF mission Ruben Atoyan said after visiting Moldova in the context of the first review of the program that agreements were reached on “the policy measures necessary to complete the first review under the current program”.
It is financed by the Fund through the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF), infotag.md reports.
Atoyan noted that the agreement is subject to approval by the IMF Executive Board, which will consider the request for completion of the first program review in September. After that, Moldova will be able to get the next tranche of 20.65 million Special Drawing Rights (about $27 million) which will bring the total amount of funds provided under the program to $245 million.
“The program is being implemented successfully despite the powerful shocks. The authorities have met all the criteria for program implementation. The structural reforms supported by the program in the areas of anti-corruption, rule of law, fiscal management and financial supervision are progressing apace.
The authorities appointed a new head of the Anti-Corruption Prosecutor’s Office well ahead of schedule, an important milestone in the program. The authorities have continued to implement much-needed reforms despite the ongoing turmoil, thus confirming their active engagement and commitment to the program,” Atoyan said.
According to him, the war in Ukraine continues to have “a significant negative impact on the Moldovan economy”. Real GDP is expected to stagnate in 2022. In addition to the deteriorating global economic outlook, supply disruptions and rising production costs, the economy is also affected by the adverse effects of the drought.
Inflation accelerated sharply due to rising energy and food prices. The lei has depreciated: this is how the exchange rate has responded to difficult market conditions.
The IMF representative noted that since the beginning of the year, the National Bank of Moldova has adjusted monetary policy to contain the effects of imported inflation and supply disruptions.
“The draft rectification of the budget for 2022, agreed with IMF experts, provides for the allocation of additional funds to ensure the protection of vulnerable people from rising energy and food prices.
Going forward, a concerted effort is needed to address the persistent under-implementation of approved budget expenditures, in order to improve spending efficiency and build confidence in the budget.
In view of the risks of a possible worsening of the situation, a resolute advance of policy measures by the authorities will be crucial to ensure support for the budget by external partners,” he stressed.
At the same time, Atoyan admitted that the risks of deterioration of economic situation remain.
“Sharper-than-expected increases in energy prices, disruptions in energy supplies, rising global food prices, rising costs of living and the proximity of war in Ukraine may further undermine economic activity and public confidence, and this may necessitate compromises on policy measures. But decisive implementation of a comprehensive reform package and continued support from the IMF and other partners should build confidence,” he said.