{"id":242159,"date":"2007-04-13T15:44:00","date_gmt":"2007-04-13T15:44:00","guid":{"rendered":"http:\/\/new.moldova.org\/2007\/04\/13\/johan-mathisen-if-program-goals-are-intact-then-the-imf-will-continue-to-finance-moldova-42060-eng\/"},"modified":"2007-04-13T15:44:00","modified_gmt":"2007-04-13T15:44:00","slug":"johan-mathisen-if-program-goals-are-intact-then-the-imf-will-continue-to-finance-moldova-42060-eng","status":"publish","type":"post","link":"https:\/\/www.moldova.org\/en\/johan-mathisen-if-program-goals-are-intact-then-the-imf-will-continue-to-finance-moldova-42060-eng\/","title":{"rendered":"Johan Mathisen: If program goals are intact, then the IMF will continue to finance Moldova"},"content":{"rendered":"<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 6<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span><p>BASA-press Agency exclusive interview with Johan Mathisen, IMF Resident to Moldova <\/p>\n<p>BASA-press: Mr. Mathisen, what do you think of the authorities&#8217; recent initiatives on fiscal reform that directly regard the Moldova Program with the International Monetary Fund? <\/p>\n<p>Johan Mathisen: We consider it is paramount any changes of the monetary and fiscal policies are consistent with preserving macroeconomic stability. I stressed this thing in the press statement on Thursday too. <\/p>\n<p>As I said repeatedly, the anchor that keeps our program with Moldovan authorities in place is the refrain of inflation by using precautious monetary and fiscal policies. What really counts for us is the fact that if any changes are operated to the macroeconomic framework, it should take into consideration the preservation of the goals related to monetary indicators and budget deficit of maximum 0.5% of GDP. <\/p>\n<p>As I have already noted in the press statement, fundamental steps that would preserve a more general framework, namely enhancing market competition, developing financial market, reducing corruption in the judicial system and other such steps are likely to be more important than just these recent initiatives for such reforms. <\/p>\n<p>It means that additional investment flows, local and foreign, will come only provided that the judicial system improves as well as other reforms are carried out such as the recent establishment of the Competition Agency, which, in order to be successful, must be independent and autonomous. Also, a financial brokerage system is required that would provide services on efficient use of population&#8217;s savings. <\/p>\n<p>BASA-press: These initiatives are said to have been discussed for a longer while and that they had not been launched several months earlier as it was planned because the IMF opposed to that. Is that true? <\/p>\n<p>Johan Mathisen: This is a question you should ask authorities. What I can say is that our interest in these proposals relies on two reasons. The first is that as representatives of the international community we are lending money to Moldova. It means that any changes of the macroeconomic and fiscal framework in this case question Moldova&#8217;s capacity to reimburse the loans. <\/p>\n<p>Another important reason why we are interested in this matter is the fact that there is a program with Moldova comprising specific indicators, which has been developed with a view to maintain a low inflation rate. And, of course, to ensure a faster economic growth and poverty reduction. <\/p>\n<p>I would also like to add that Moldova, as any IMF member, is entitled to ask for consultancy regarding any initiative it wants to launch. <\/p>\n<p>We are trying to acquire the best practices from all IMF member countries and replicate them in other countries. <\/p>\n<p>We established a very close and efficient dialogue with the Government. <\/p>\n<p>BASA-press: Do you think the announced initiatives affect somehow the objectives provided for in the Economic and Financial Policy Memorandum approved by the National Bank and the Government? <\/p>\n<p>Johan Mathisen: Let&#8217;s refer first to the proposal to reduce the income tax for economic units to zero. <\/p>\n<p>We have reached an agreement with the Government that budget deficit should not exceed 0.5% of GDP. Any changes, any lowering of the income tax rate would be a potential loss for the budget. From the macroeconomic point of view, this step would have an effect similar to increasing wages. Difficulties appear if you reduce revenues, increase expenditures and at the same time try to maintain the set out budgetary deficit. In particular, if we take into account the fact that one of the key objectives stated by the Government is to enhance capital investments. <\/p>\n<p>But please understand me correctly: we think that lowering income tax rates in order to attract investments is a welcomed step. <\/p>\n<p>However, there is one &quot;but&quot;. Namely, this step should be carried out in such a way that the fiscal system affords it financially. We fear that increasing expenditures for wages, reducing income driven from taxes will lower capital investments. <\/p>\n<p>BASA-press: Is there a &quot;but&quot; in relation to legalization of capital or fiscal amnesty? <\/p>\n<p>Johan Mathisen: As I said, we are still analyzing the details. But we do have a comprehensive international experience in what regards such proposals. And, generally, experience shows that the outcomes of implementing such initiatives are both positive and negative. <\/p>\n<p>There are three reasons of concern when we speak of fiscal amnesty. Concerns arouse in any country, Moldova is no exception. One is loosing budget incomes. The second is being fair with all taxpayers. And third, the implications for fiscal revenues in the future. I mean, paying taxes in the future. <\/p>\n<p>When we speak of losing income to the budget, international experience shows that generally, the best practice in this regard is this: amnesty the debts that cannot be collected, namely, the debts of the companies that do not exist anymore. As to the fiscal arrears that could be collected, international practice suggests to establish a debt management system that would make possible payment of a part of it. Respectively, if you cancel a part of the arrears that could be collected the budget will report an income loss. <\/p>\n<p>If we take on one hand the economic unit that honored its obligations to the state and paid taxes, was disciplined, and observed the legislation, and on the other hand, another economic unit that was incapable to pay taxes to the budget, and you amnesty its debts. At this point businessmen may ask themselves to what extent this amnesty is fair. And, thirdly, it was noted that in some countries such initiatives undermine fiscal discipline in the future. Some countries had to repeat these steps several times. As soon as taxpayers understand that there might be another amnesty in the future, there willingness to observe legislation reduces. <\/p>\n<p>From our experience, we can say that there should be two prerequisites for such an initiative to be successful. Firstly, it should be a one-time thing that will never repeat again. The second condition is strengthening fiscal management. <\/p>\n<p>If fiscal arrears are cancelled then the capacity to impose observance of fiscal legislation should be strengthened in the future. <\/p>\n<p>The implementation of the tax inspectorate reform strategy, in my opinion, and I think in our organization&#8217;s opinion too, is absolutely essential. <\/p>\n<p>There are many organizations such as MONEYVAL that might say more about the capital amnesty initiative. It is essential that Moldova maintains a close dialogue with such organization in order to ensure that such initiatives will not have negative consequences for the economy. <\/p>\n<p>It is important for the new draft law on preventing money laundering to anticipate the capital amnesty initiative. To this effect, the IMF Legal Department provides technical assistance to Moldova. We are maintaining a close dialogue on the draft that is being worked out. We encourage authorities, the Government to make progress in this regard. <\/p>\n<p>BASA-press: These initiatives have been launched shortly after a visit of an IMF technical mission to Chisinau. Did the mission held talks on the initiatives? <\/p>\n<p>Johan Mathisen: The details are confidential. The information stays with the experts and Moldovan authorities. <\/p>\n<p>Generally, we welcome the initiatives. But the discussion stays at whether the country is able to honor such costs without undermining the fiscal framework for this year and the years to come. And it is important not experience consequences regarding Moldova&#8217;s image abroad. <\/p>\n<p>BASA-press: It was said that these initiatives will be widely discussed by the mission that will arrive in Moldova and Moldovan authorities. Will they discuss to what extent these initiatives enjoy financial cover or their advisability in general? <\/p>\n<p>Johan Mathisen: This will be one of the main issues when the mission arrives on April 25. The mission will update the information on the implementation of the program until that point in time. The data on program evaluation will be presented on March 31. Half of the discussions will focus on these issues, and the other half, on the perspectives, monetary and fiscal-budgetary policies, structural steps that are to be taken in the next six months of program implementation. <\/p>\n<p>The objective of lowering inflation under 10% and a budget deficit of 0.5% of GDP will be preserved. The mission will take into account the proposals made and the recent salary raise in public sector, and the wish expressly stated by authorities to increase investments. <\/p>\n<p>BASA-press: In the past, did the authorities&#8217; actions that brought about expenditure increase, led to suspension of IMF financial program? <\/p>\n<p>Johan Mathisen: I cannot comment on what happened in the past. I do not know the details. What I can say is that if the program objectives stay intact, then the IMF expectations are to maintain its commitments to Moldova.&nbsp; \/\/ BASA-Press<\/p>\n<p>I repeat myself, the deficit level of 0.5% of GDP and inflation under 10% should be maintained for the Fund&#8217;s program to continue. <\/p>\n<p>I think we will have interesting discussions between the mission and authorities. <\/p>\n<p>BASA-press: From what we see, the IMF relations with the Government are very good lately. <\/p>\n<p>Johan Mathisen: Of course. I can confidently confirm this. From my experience, I can tell that the degree of authorities&#8217; commitment to the responsibility for what is happening has improved more than in any other country I worked in.<\/p>\n","protected":false},"excerpt":{"rendered":"<p><span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 6<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span>BASA-press Agency exclusive interview with Johan Mathisen, IMF Resident to Moldova<\/p>\n<p>BASA-press: Mr. Mathisen, what do you think of the authorities&#8217; recent initiatives on fiscal reform that directly<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-242159","post","type-post","status-publish","format-standard","hentry","category-economy"],"content_social_share":"<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 6<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span><p>BASA-press Agency exclusive interview with Johan Mathisen, IMF Resident to Moldova <\/p>\n<p>BASA-press: Mr. Mathisen, what do you think of the authorities&#8217; recent initiatives on fiscal reform that directly regard the Moldova Program with the International Monetary Fund? <\/p>\n<p>Johan Mathisen: We consider it is paramount any changes of the monetary and fiscal policies are consistent with preserving macroeconomic stability. I stressed this thing in the press statement on Thursday too. <\/p>\n<p>As I said repeatedly, the anchor that keeps our program with Moldovan authorities in place is the refrain of inflation by using precautious monetary and fiscal policies. What really counts for us is the fact that if any changes are operated to the macroeconomic framework, it should take into consideration the preservation of the goals related to monetary indicators and budget deficit of maximum 0.5% of GDP. <\/p>\n<p>As I have already noted in the press statement, fundamental steps that would preserve a more general framework, namely enhancing market competition, developing financial market, reducing corruption in the judicial system and other such steps are likely to be more important than just these recent initiatives for such reforms. <\/p>\n<p>It means that additional investment flows, local and foreign, will come only provided that the judicial system improves as well as other reforms are carried out such as the recent establishment of the Competition Agency, which, in order to be successful, must be independent and autonomous. Also, a financial brokerage system is required that would provide services on efficient use of population&#8217;s savings. <\/p>\n<p>BASA-press: These initiatives are said to have been discussed for a longer while and that they had not been launched several months earlier as it was planned because the IMF opposed to that. Is that true? <\/p>\n<p>Johan Mathisen: This is a question you should ask authorities. What I can say is that our interest in these proposals relies on two reasons. The first is that as representatives of the international community we are lending money to Moldova. It means that any changes of the macroeconomic and fiscal framework in this case question Moldova&#8217;s capacity to reimburse the loans. <\/p>\n<p>Another important reason why we are interested in this matter is the fact that there is a program with Moldova comprising specific indicators, which has been developed with a view to maintain a low inflation rate. And, of course, to ensure a faster economic growth and poverty reduction. <\/p>\n<p>I would also like to add that Moldova, as any IMF member, is entitled to ask for consultancy regarding any initiative it wants to launch. <\/p>\n<p>We are trying to acquire the best practices from all IMF member countries and replicate them in other countries. <\/p>\n<p>We established a very close and efficient dialogue with the Government. <\/p>\n<p>BASA-press: Do you think the announced initiatives affect somehow the objectives provided for in the Economic and Financial Policy Memorandum approved by the National Bank and the Government? <\/p>\n<p>Johan Mathisen: Let&#8217;s refer first to the proposal to reduce the income tax for economic units to zero. <\/p>\n<p>We have reached an agreement with the Government that budget deficit should not exceed 0.5% of GDP. Any changes, any lowering of the income tax rate would be a potential loss for the budget. From the macroeconomic point of view, this step would have an effect similar to increasing wages. Difficulties appear if you reduce revenues, increase expenditures and at the same time try to maintain the set out budgetary deficit. In particular, if we take into account the fact that one of the key objectives stated by the Government is to enhance capital investments. <\/p>\n<p>But please understand me correctly: we think that lowering income tax rates in order to attract investments is a welcomed step. <\/p>\n<p>However, there is one &quot;but&quot;. Namely, this step should be carried out in such a way that the fiscal system affords it financially. We fear that increasing expenditures for wages, reducing income driven from taxes will lower capital investments. <\/p>\n<p>BASA-press: Is there a &quot;but&quot; in relation to legalization of capital or fiscal amnesty? <\/p>\n<p>Johan Mathisen: As I said, we are still analyzing the details. But we do have a comprehensive international experience in what regards such proposals. And, generally, experience shows that the outcomes of implementing such initiatives are both positive and negative. <\/p>\n<p>There are three reasons of concern when we speak of fiscal amnesty. Concerns arouse in any country, Moldova is no exception. One is loosing budget incomes. The second is being fair with all taxpayers. And third, the implications for fiscal revenues in the future. I mean, paying taxes in the future. <\/p>\n<p>When we speak of losing income to the budget, international experience shows that generally, the best practice in this regard is this: amnesty the debts that cannot be collected, namely, the debts of the companies that do not exist anymore. As to the fiscal arrears that could be collected, international practice suggests to establish a debt management system that would make possible payment of a part of it. Respectively, if you cancel a part of the arrears that could be collected the budget will report an income loss. <\/p>\n<p>If we take on one hand the economic unit that honored its obligations to the state and paid taxes, was disciplined, and observed the legislation, and on the other hand, another economic unit that was incapable to pay taxes to the budget, and you amnesty its debts. At this point businessmen may ask themselves to what extent this amnesty is fair. And, thirdly, it was noted that in some countries such initiatives undermine fiscal discipline in the future. Some countries had to repeat these steps several times. As soon as taxpayers understand that there might be another amnesty in the future, there willingness to observe legislation reduces. <\/p>\n<p>From our experience, we can say that there should be two prerequisites for such an initiative to be successful. Firstly, it should be a one-time thing that will never repeat again. The second condition is strengthening fiscal management. <\/p>\n<p>If fiscal arrears are cancelled then the capacity to impose observance of fiscal legislation should be strengthened in the future. <\/p>\n<p>The implementation of the tax inspectorate reform strategy, in my opinion, and I think in our organization&#8217;s opinion too, is absolutely essential. <\/p>\n<p>There are many organizations such as MONEYVAL that might say more about the capital amnesty initiative. It is essential that Moldova maintains a close dialogue with such organization in order to ensure that such initiatives will not have negative consequences for the economy. <\/p>\n<p>It is important for the new draft law on preventing money laundering to anticipate the capital amnesty initiative. To this effect, the IMF Legal Department provides technical assistance to Moldova. We are maintaining a close dialogue on the draft that is being worked out. We encourage authorities, the Government to make progress in this regard. <\/p>\n<p>BASA-press: These initiatives have been launched shortly after a visit of an IMF technical mission to Chisinau. Did the mission held talks on the initiatives? <\/p>\n<p>Johan Mathisen: The details are confidential. The information stays with the experts and Moldovan authorities. <\/p>\n<p>Generally, we welcome the initiatives. But the discussion stays at whether the country is able to honor such costs without undermining the fiscal framework for this year and the years to come. And it is important not experience consequences regarding Moldova&#8217;s image abroad. <\/p>\n<p>BASA-press: It was said that these initiatives will be widely discussed by the mission that will arrive in Moldova and Moldovan authorities. Will they discuss to what extent these initiatives enjoy financial cover or their advisability in general? <\/p>\n<p>Johan Mathisen: This will be one of the main issues when the mission arrives on April 25. The mission will update the information on the implementation of the program until that point in time. The data on program evaluation will be presented on March 31. Half of the discussions will focus on these issues, and the other half, on the perspectives, monetary and fiscal-budgetary policies, structural steps that are to be taken in the next six months of program implementation. <\/p>\n<p>The objective of lowering inflation under 10% and a budget deficit of 0.5% of GDP will be preserved. The mission will take into account the proposals made and the recent salary raise in public sector, and the wish expressly stated by authorities to increase investments. <\/p>\n<p>BASA-press: In the past, did the authorities&#8217; actions that brought about expenditure increase, led to suspension of IMF financial program? <\/p>\n<p>Johan Mathisen: I cannot comment on what happened in the past. I do not know the details. What I can say is that if the program objectives stay intact, then the IMF expectations are to maintain its commitments to Moldova.&nbsp; \/\/ BASA-Press<\/p>\n<p>I repeat myself, the deficit level of 0.5% of GDP and inflation under 10% should be maintained for the Fund&#8217;s program to continue. <\/p>\n<p>I think we will have interesting discussions between the mission and authorities. <\/p>\n<p>BASA-press: From what we see, the IMF relations with the Government are very good lately. <\/p>\n<p>Johan Mathisen: Of course. I can confidently confirm this. From my experience, I can tell that the degree of authorities&#8217; commitment to the responsibility for what is happening has improved more than in any other country I worked in.<\/p>\n<div class='heateorSssClear'><\/div><div  class='heateor_sss_sharing_container heateor_sss_horizontal_sharing' data-heateor-sss-href='https:\/\/www.moldova.org\/en\/johan-mathisen-if-program-goals-are-intact-then-the-imf-will-continue-to-finance-moldova-42060-eng\/' data-heateor-sss-no-counts=\"1\"><div class='heateor_sss_sharing_title' style=\"font-weight:bold\" ><\/div><div class=\"heateor_sss_sharing_ul\"><a aria-label=\"Facebook\" class=\"heateor_sss_facebook\" href=\"https:\/\/www.facebook.com\/sharer\/sharer.php?u=https%3A%2F%2Fwww.moldova.org%2Fen%2Fjohan-mathisen-if-program-goals-are-intact-then-the-imf-will-continue-to-finance-moldova-42060-eng%2F\" title=\"Facebook\" rel=\"nofollow noopener\" target=\"_blank\" 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