MOLDOVAN GOVERNMENT ASKS IMF TO EXTEND THE PROGRAM TILL MARCH 2020

IMF staff and Moldovan authorities reached a staff-level agreement on the fourth and fifth reviews under the IMF-supported economic program.

According to the IMF Office in Moldova press release, staff supported the authorities’ request to extend the arrangements to March 2020 to allow for the successful completion of the program.

“The Moldovan leadership has made progress in strengthening macro-economic policies, addressing vulnerabilities in the financial sector, and improving governance and supervisory frameworks. Sustaining the reform momentum, safeguarding priority spending on poverty reduction and public investment, and pursuing decisive steps to fight corruption and recover assets stolen in the 2014 bank fraud will be critical to maintain macroeconomic stability and improve living standards of Moldova’s people”, the document says.

The agreement is subject to an approval by the IMF management and the IMF Executive Board. Consideration by the Executive Board could take place in September 2019, subject to implementation by the authorities of agreed prior actions on ensuring the sustainability of public finances, improving tax compliance, and advancing the banking sector rehabilitation.

The mission reached an understanding on fiscal measures needed to correct policy slippages from the 2018 package of tax initiatives and capital and tax amnesty that undermined program objectives and led to rising budgetary pressures. The authorities plan to approve a sound 2019 supplementary budget to mitigate fiscal vulnerabilities, while protecting priority social spending.

“Monetary policy should remain focused on price stability. The National Bank has appropriately increased its policy rate in June in response to building inflationary pressures. It should stand ready to take further actions to steer inflation towards the 5 percent target. The NBM’s strategy to allow greater exchange rate flexibility –with interventions limited to smoothing excessive volatility – will strengthen credibility of its inflation targeting regime”, the press release says.