Moldovan Government and IMF Reached an Agreement Worth 564 Million US Dollars for Financing the Modernization of the Country
The government announced on Thursday, October 21, that it had reached an agreement at expert level with the International Monetary Fund on financing worth 564 million dollars for the “modernization of Moldova.” An announcement in this regard was made by Prime Minister Natalia Gavrilița.
“I would like to inform you that the Government’s negotiations with the IMF have been successfully concluded. The process of modernization of Moldova involves many changes for the better, life to become more comfortable at home, sewerage networks, support for modernizing agriculture, increasing the quality of vital systems of society, increasing funds allocated to encourage people to solve local problems. The program we agreed with the IMF aims to prioritize the fight against corruption. We are committed to making extraordinary assessments in the field of Justice. We will continue to fund programs already started, such as raising pensions, but we will also fund new projects to offset energy bills, increase public sector wages. We are committed to strengthening the framework in the banking financial system. Negotiating a new program with the IMF was a success. The agreement provides for 564 million dollars,” said Natalia Gavrilița.
The IMF mission and the Moldovan authorities have reached an expert-level agreement on a 40-month economic reform program worth about 564 million US dollars, which will be financed under the Extended Lending Mechanism and the Extended Financing Mechanism. The new program aims to support the economic recovery and launch an ambitious agenda to reform governance and the institutional framework. Once the objective of economic recovery has been achieved, it will be extremely important to ensure the correlation of the development objectives set with budgetary discipline and the sustainability of public debt.
According to the IMF, the new program will facilitate economic recovery by promoting an appropriate set of policies and allow for the advancement of long-term institutional and governance reforms aimed at restoring the necessary reserves to drive rapid, comprehensive growth and sustainable income. Key reforms relate to the areas included in the IMF-defined governance framework, including strengthening transparency and accountability, improving the predictability of public policies, strengthening financial institutions, ensuring deregulation, and encouraging competition.
The IMF forecasts 7.5 percent economic growth in 2021, largely at the expense of strong domestic demand. There is an acceleration in the inflation rate as a result of the recovery in demand and rising prices for energy resources and food. According to the forecast, in 2021 the budget deficit will reach the level of 5 percent of GDP, given the increase in expenditures related to the current crisis. Public debt has reached 34 percent of GDP, and its external position has deteriorated due to rising prices for global consumer goods, but also as a result of the recovery of domestic economic activity.