Press Release No. 24/431

IMF and Moldovan Authorities Reach Staff-Level Agreement on the Sixth Review under the Extended Credit Facility and Extended Fund Facility Arrangements and the Second Review under the Resilience and Sustainability Facility Arrangement

November 21, 2024

• IMF staff and the Moldovan authorities have reached staff-level agreement on policies for completion of the sixth reviews under the Extended Credit Facility and Extended Fund Facility (ECF/EFF) arrangements and for the second review under the Resilience and Sustainability Facility (RSF) arrangement.
• The economic recovery is taking hold with growth projected at 2.6 percent this year and 3 percent next year. The fiscal deficit is projected to decline from 5.2 percent in 2023 to 4.4 percent in 2024 and 4.0 percent in 2025.
• Program performance has been mixed, with good quantitative results but delays in the implementation of structural reforms.

Washington, DC: An IMF team, led by Alina Iancu, conducted discussions over the past few weeks in Chișinău, Washington, and virtually, for the sixth reviews of Moldova’s programs under the ECF/EFF arrangements, and the second review under the RSF arrangement. Discussions have concluded, and Ms. Iancu has issued the following statement:

“The Moldovan authorities and the IMF team have reached staff-level agreement on policies to complete the sixth reviews of Moldova’s programs under the ECF/EFF and the second review under the RSF. The agreement is subject to approval by the IMF Management and Executive Board. Completing the reviews will make SDR 111.4 million (about US$148.3 million) available, bringing total disbursements under the ongoing programs to about US$810 million.

“The recovery from adverse spillovers from Russia’s war in Ukraine and energy price shocks is taking hold. Growth is projected at 2.6 percent in 2024 and 3 percent in 2025, driven by robust domestic demand. Inflation has remained broadly within the National Bank of Moldova’s 5 ± 1.5 percent target corridor since October 2023. Downside risks remain high, mainly related to the war in Ukraine and renewed energy shocks. By contrast, faster progress on structural reforms, including under the EU Growth Plan, and steady progress on the EU accession path represent upside risks.

“The downward revision of the fiscal deficits for 2024 and 2025 to 4.4 and 4.0 percent of GDP, respectively, reflects stronger-than-expected revenues, driven by buoyant wage and import growth. Meanwhile government spending has been kept largely unchanged with a welcome rebalancing towards investment next year.

“While quantitative performance has been strong, implementation of structural reforms has been uneven. The authorities completed conditionality related to financial inclusion, the insurance sector, and state-owned enterprises, while legal amendments to strengthen autonomy and governance of the National Bank of Moldova are expected to be submitted to Parliament soon. Agreed actions to establish the Anti-Corruption Court and ensure appropriate staffing of the Anti-Corruption Prosecutor’s Office are pending. The switch from providing in-bill energy subsidies to targeted cash transfers took place in time for the current heating season. Other RSF reform measures are in progress but will require more time to complete.

“Consideration of the reviews by the IMF Executive Board is planned for mid-December. The program is expected to include two more reviews and run until October 2025.