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Increased financing for the Republic of Moldova was discussed at the Annual Meetings of the IMF and the World Bank Group



An official delegation from the Republic of Moldova took part in the discussions at the 2019 Annual Meetings of the International Monetary Fund and the World Bank Group, which were held during the period October 14-20, 2019, in Washington.

According to a note made by Fiscal Monitor, the Government’s priorities in implementing good governance, transparency of spending in the public sector, improving the management of state-owned enterprises, as well as the impact of these measures on economic growth were discussed at the bilateral meetings with the IMF and World Bank Officials. At the same time, the needs to reform the public investment system and to review the spending in the public sector were highlighted, as well as the elaboration of a strategy for the management of public finances in 2020.

The delegation from Moldova was formed of Minister of Finance Natalia Gavrilița, Minister of Economy and Infrastructure Vadim Brînzan, Governor of the National Bank of Moldova Octavian Armașu, State Secretary at the Ministry of Finance Sergiu Luca and First Deputy Governor of the National Bank Vladimir Munteanu.

“Our partners appreciated that the Government was able to carry out two evaluations and to relaunch external assistance for the Republic of Moldova within a very short period of time. At the same time, during the meetings we talked about the financing possibilities for 2020. The representatives of the European Union have given us assurances that they will examine the possibility of doubling the assistance to Moldova in the following year,” declared Minister of Finance Natalia Gavrilița.

Besides having an exchange of opinions with senior representatives of the IMF and the World Bank Group, the official delegation from Moldova had meetings with economists and experts of the U.S. Treasury, with representatives of the European Union, big investment funds and international banks.



In the coronavirus economic crisis: attempts to help the most affected sectors



The National Extraordinary Public Health Commission issued recently a decision, according to which the activity of shops, restaurants, fitness centres, concert halls, theatres, cinemas, museums must be stopped by April 1. The adopted measure is related to the state of emergency declared by the Parliament of the Republic of Moldova throughout the territory of the country until May 15.

As a consequence, business associations from Moldova called for adoption of supporting measures to help companies mitigate the negative effects of the coronavirus outbreak. An online petition addressed to the Government of the Republic of Moldova was signed by thousands of citizens.

“The most powerful hit will be recorded in the case of small and medium-sized enterprises. Considering their vulnerability, the impact can be irrecoverable. Many of them will suffer major losses, some will partially or completely cease their activity, others may go bankrupt. Such areas as services, leisure, tourism, hotel, restaurants, catering, retail, event organisers and many others will be affected by quarantine and preventive measures,” the petition stated.

Government’s list of actions

On March 19, Prime Minister Ion Chicu announced a list of measures that will be taken to help business entities from Moldova during the pandemic situation. Among them are such measures as:

  • postponing income tax payments;
  • reducing VAT taxes for restaurant, hotels and catering companies;
  • introducing a moratorium for tax controls;
  • cancelling the compulsory audit of the individual financial statements for the year 2019;
  • offering the possibility of commercial banks to reschedule mortgages for individuals and provide loans under more favourable conditions;
  • increasing the Government Intervention Fund by 150 million lei, for offering bank lending guarantees to strategic economic entities, etc.

“The extraordinary situation requires extraordinary measures. The crisis will generate losses, but together we will identify solutions to reduce losses. […] At the moment, the budget incomes are at a normal level, being 14% higher than compared to the similar period of last year. We need to identify adequate policies and measures to minimise the effects of this crisis,” said Ion Chicu during the meeting with business associations, as a Government statement reported.


The National Bank of Moldova (NBM) announced that the institution will continue to use all available tools to meet the objectives of price stability and consolidation of the banking sector, which, at the moment, is declared as being well capitalised and resilient.

However, economic experts say that the pandemic could affect the labor market and that the authorities have little room to financially help the business environment, as it is the case in European countries, but it could resort to external loans.

Companies’ mitigation measures

Andrei Crigan who is an economist and business consultant, said that especially small and medium-sized enterprises (SME) are subject to lower incomes under the pandemic conditions, due to the pressure exercised by fixed costs such as rent, utilities and salaries.

According to the economist, companies must make crisis plans, analysing cost cutting, contract re-negotiations and losses minimisation opportunities. “In this period, the most important thing is the association with other entrepreneurs in order to exchange experience, observation of what others are doing to protect themselves, merging efforts and distributing the expenses together,” explained the specialist.

Also, Crigan stated that it is premature to talk about how much money the state will need in order to support the business environment.

In this regard, companies are advised to take more and more into account digital marketing activities in order to survive in such hard conditions. Offer home delivery possibilities, invest in digital promotion through social media and in situational marketing through corporate social responsibility are just some of them. Additionally, companies shall try to switch to online payment methods and active use of contactless bank cards, so as to reduce the risks of COVID-19 transmission.

Specific industries’ problems

Not all companies can switch to online environment though. Economic expert at Expert-Grup, Iurie Morcotîlo, said that companies oriented to the internal market, such as hotels, restaurants, shops, will be affected in the short term, because the main revenues come from direct contact with people.

In the long run, exports-oriented enterprises will be affected, because consumer demand among importing countries will decrease. “We must acknowledge that public finances this year will be suffering significantly, as the volume of tax collections will be lower than anticipated at the beginning of the year. The state budget will have to be revised and many initially planned expenditures will not be disbursed,” the expert claimed.

According to the economic expert, there is a reserve fund for exceptional situations, but not for business support, while the Government could resort to external credits or increasing the domestic debt, if the volume of expenses will grow.

Not all companies took the necessary preventive measures related to the COVID-19 pandemic situation. Activists are alarmed that work on some construction sites wasn’t stopped, as well as in many factories and service providing companies, whereas protecting equipment wasn’t distributed to employees.

More than 24 thousand people have signed an online petition signalling the increase in food prices and asking the authorities to take measures to protect the citizens. Meanwhile, on social networks people claim that they have observed an increase in prices for vegetables, fruits, dairy products, meat, hygiene products and disinfectants.

On the other hand, some Moldovan companies continue to help those who fight coronavirus nowadays. Businesses donate money to hospitals in the country, support educational project of developing online learning platforms, provide e-books for free, offer free psychological consultations for doctors, cosmetic producers focus all their resources to producing disinfectants.

Despite the losses they face during this period, several restaurants and food producing companies offer free food to doctors, taxi drivers bring doctors to work for free, young musicians organise live concerts online and groups of volunteers are organised to take care of their elderly neighbours by going to stores or pharmacies instead of them. Everyone who can afford it is advised to stay home.

See also: When facing hard times: Moldovans’ acts of kindness during the coronavirus outbreak

Photo: Adeolu Eletu |Unsplash

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$20 million as the last IMF disbursement to Moldova was approved



The Executive Board of the International Monetary Fund (IMF) completed the sixth and final review of Moldova’s economic performance under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements, an official statement of the IMF announced. As a result of the review, a disbursement of SDR 14.4 million (about US$ 20 million) is planned, bringing the total amount of funds disbursed to Moldova to SDR 129.4 million (about US$ 178.7 million).

See the conclusions drawn after the last visit paid by the IMF staff to Moldova in the article “The IMF conclusions// will the last part of the program funds be disbursed to Moldova?”

Regarding Moldova’s success in implementing economic and financial reforms, the following judgements were issued:

  • The three-year program has been broadly successful in achieving its objectives. Comprehensive reforms have rehabilitated the banking system and strengthened financial sector governance, entrenching macro-financial stability.
  • Prudent and well-coordinated policies are needed to safeguard the progress achieved.
  • Decisive governance and institutional reforms are necessary for faster, sustainable, and inclusive growth.

“The Moldovan authorities have successfully completed the three-year Fund-supported arrangements despite a challenging political landscape. A key objective achieved was the rehabilitation of the banking sector, which—alongside other reforms—helped entrench macroeconomic and financial stability.  However, growth remains insufficient to significantly boost living standards of the Moldovan people, stated Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair after the meeting of the Executive Board.

The IMF official highlighted that significant progress has been achieved in reforming the banking sector, by securing bank shareholder transparency via fitness and probity of bank owners, improved supervisory and regulatory frameworks, unwinding bank related-party exposures, and strengthening financial safety nets. “Moving ahead, addressing risks in the non-bank financial sector, improving the AML/CFT [ Anti-Money Laundering/Combating the Financing of Terrorism] framework, and making decisive progress on asset recovery will be critical to safeguard macro-financial stability,” Furusawa said.

At the same time, the IMF Executive Board assessed the National Bank of Moldova’s (NBM) inflation-targeting regime as appropriate. Still, the statement claimed that “additional efforts to strengthen the NBM’s operational framework and capacity will further enhance its policy credibility in the context of a flexible exchange rate regime.” 

The 2020 budget policy is also considered as appropriate by the IMF, considering the significant infrastructure and developmental needs in Moldova. In this context, the Moldovan authorities were advised to continuously engage with external partners, that being vital to secure needed financing for urgent projects.

Priority reforms are needed, including in the areas of revenue mobilisation, streamlining tax expenditures, and increasing the efficiency of public spending and investment management, especially when it comes to state-owned enterprises, as the IMF officials stated.

All in all, “it is imperative that the authorities continue to pursue a prudent and well-coordinated policy mix, including structural reforms aimed at further strengthening the financial sector, a growth-friendly fiscal policy to increase infrastructure spending and support priority social expenditure while maintaining fiscal sustainability, and strengthening Moldova’s governance framework and institutions,” the IMF Executive Board recommended.

Moldova’s three-year IMF program was approved on November 7, 2016, being supported by a loan of 129.4 million special drawing rights (SDR), which is 75% of the Republic of Moldova’s quota. Two thirds of the loan were provided under the Extended Credit Facility, which carried a zero interest rate through 2018, a grace period of 5½ years, and a 10-year maturity. The rest of the loan was provided under the Extended Fund Facility, which carried an annual interest rate equal to the SDR basic rate of charge (currently 1.7 percent), and is repayable over 10 years with a 4½ -year grace period.


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It’s official: the NBM must redirect its profits to pay back a part of the stolen billion



Even though the measure was criticized by the experts and political opposition, MPs still voted the mechanism previously proposed by President Igor Dodon, according to which a part of the stolen billion from the Moldovan banking system will be refunded by redirecting the annual profits of the National Bank of Moldova (NBM).

Read more about the legislative measure in the article “Who is going to pay back the stolen billion? President Dodon proposed a new legislative measure”

The mechanism provides for allocating the NBM profit available for distribution to the state budget revenue as following:

if the statutory capital constitutes less than 4.0% of the total monetary obligations of the National Bank, the profit available for distribution will be allocated entirely to increase the statutory capital of the institution. If the statutory capital constitutes from 4.0% to 10.0%, out of the total monetary obligations of the National Bank, 50% of the profit available for distribution will be allocated to the increase of the statutory capital, and 50% – to the state budget revenue. If the statutory capital represents more than 10.0% of the total monetary obligations of the NBM, the profit available for distribution will be transferred entirely to the state budget revenue.

The unaudited preliminary results of the NBM showed that, there was a profit available for distribution in the amount of 436 million lei in 2019. As TV8 reported, the institution recorded a profit in 2018 (249 million lei), and until then, recorded losses in 2016 (-262 million lei) and 2017 (-95 million lei).

All in all, in the period between 2017 and 2041, citizens of the Republic of Moldova have to pay over 13 billion lei principal and over 11 million lei interest after the emergency loans disbursed by the National Bank of Moldova to the bankrupted banks involved in the “Great Moldovan Bank Robbery”, that happened in 2014, were converted into state debt.

Photo: Pepi Stojanovski| Unsplash

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