Moldova close to reaching critical agreement with IMF

By bne IntelliNews July 18, 2016

Only a few issues remain outstanding and discussions will continue from Washington in the coming days, the International Monetary Fund (IMF) mission in Moldova announced on July 15 when leaving Chisinau after a ten-day visit to prepare a possible three-year arrangement under the Fund’s Extended Fund Facility and Extended Credit Facility (EFF/ECF).

The Fund is considering extending around $180mn in financial support for the country’s economic reform programme. The agreement is critical for the government not only because of the financial support from the IMF, but also because it would unfreeze the financing from other development partners – the World Bank, Romania and the European Union.

“I am sure we are going to have an agreement signed with the IMF, because the issues still to be completed are of a technical nature,” Prime Minister Pavel Filip commented. He also said that the government is committed to pursuing all of the reforms agreed with the IMF.

The government’s attempts to seal an agreement with the IMF will have inevitable political implications. The fragile ruling coalition, broadly seen as a creation of controversial businessman Vlad Plahotniuc, expects to collect political dividends in the October 30 presidential elections, or at least take a head start in potential before-term parliamentary elections. One of the opposition candidates, Maia Sandu of the Action and Solidarity party (PAS), urged the Fund in an open letter not to sign an agreement with the current government of Moldova.

“Discussions focused on the outlook for growth, financial sector policies, the sustainability of public finances and structural reforms needed to improve the business climate and attract investments,” the Fund explained in its July 15 press release.  

Agreements were reached in a number of critical areas, including on reforms to enhance governance and transparency in the banking sector, to ensure the financial sustainability of the energy sector and to achieve medium-term fiscal policy objectives.

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