March 28 (SeeNews) - The International Monetary Fund (IMF) said it has reached a staff-level agreement with Moldova to make available $34.9 million (28.2 million euro) to the country under the current three-year funding arrangement.
The staff-level agreement will be submitted to the IMF management and executive board which are expected to decide on the financing in May, following the authorities’ implementation of a number of prior actions, the global lender said in a statement on Tuesday.
An IMF mission led by Ben Kelmanson visited Chisinau from March 15-27 and held discussions with the Moldovan authorities on the third review under the IMF-backed economic programme.
Moldova should make further efforts to improve public investment and social spending, tax and customs reforms, as well as the efficiency of spending, the IMF said.
“The authorities continue to take measures to improve further medium-term prospects, including through strengthening economic governance, addressing the shadow economy and reducing regulatory and administrative burdens. Promoting greater transparency, predictability, and good governance in the energy sector remain a priority," Ben Kelmanson said.
Moldova already received a total of $79.5 million in three tranches under the current three-year credit facility of $183.1 million approved in November 2016.
“The Moldovan authorities continue to make progress in strengthening economic policies and addressing vulnerabilities in the banking sector. These efforts have helped preserve financial stability and strengthen the foundation for medium-term. Economic growth was strong in 2017, supported by robust domestic demand and a favorable external environment," Ben Kelmanson said.
IMF expects economic growth to continue in 2018, and growth is projected to remain solid, at 3.8%.
Moldova's economy expanded by 4.5% in real terms in 2017, mainly on the back of successful performance of the agriculture, wholesale and retail sectors.
“Monetary policy continues to be focused on price stability in the context of a flexible exchange rate regime. Inflation peaked in late 2017 and is expected to slow further in 2018. The current policy stance is appropriate and, in the near term, the central bank should keep monetary policy on hold, without excessively responding to transitory changes to food and regulated prices," Ben Kelmanson said.
Moldova's central bank, BNM, decided on March 1 to maintain its key rate at 6.5%, striving to keep inflation close to the target level. BNM last changed its key monetary policy rate in December, lowering it by 0.5% to 6.5%.
In January, Moody's Investors Service said that Moldova's credit profile reflects the country's low economic strength, weak institutions and its vulnerability to external shocks. Moody's expects Moldova's economy to grow by around 3.5% in 2018.
Moody's last changed the outlook on Moldova's government bond rating one year ago, from negative to stable, and affirmed the country's B3 rating.
($=0.8071 euro)