November 8 (SeeNews) - The International Monetary Fund's (IMF) executive board approved a $178.7 million (161.4 million euro) three-year funding arrangements with Moldova aimed to support the country’s economic and financial reform programme, the IMF said on Monday.
The arrangements under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) with Moldova, provide access to financing at a level of 75% of the country's IMF quota, the IMF said in a statement.
The IMF will make available to Moldova about $35.9 million immediately after the approval of the arrangements, with the remainder to be phased in over the duration of the programme, subject to five semi-annual reviews.
The programme "aims at reinforcing the recent economic stabilization and advancing a broad structural reform agenda, particularly in the financial sector. Strong commitment to sound policies and a significant improvement in economic governance will be crucial to raising long-term growth prospects," IMF's deputy managing director and acting chair Mitsuhiro Furusawa said following the executive board meeting.
Also, Furusawa added, significant upfront progress has been made in enhancing the resilience of the banking sector and address weaknesses that gave rise to the 2014 crisis, but an effective and independent court system and central bank will be critical to support these efforts.
Moldova has been trying to cope with a major banking crisis since about $1 billion went missing from three local banks in November 2014. The banks - Banca de Economii, Banca Sociala and Unibank were liquidated.
“Fiscal policy has been recently constrained by falling revenues and tight financing. The 2016 budget deficit is set to widen modestly to support the nascent recovery, as debt remains sustainable despite the high fiscal cost of the banking crisis. Fiscal policy will need to be anchored in a sound medium-term framework and supported by measures to strengthen the revenue base and prioritize social and infrastructure spending," Furusawa added.
Moldova's 2016 budget bill projects deficit at 4.3 billion lei (215 million/194 million euro), higher than the 3.9 billion lei deficit recorded in 2015.
Mitsuhiro Furusawa said that Moldova's monetary policy has been appropriate, geared toward maintaining low inflation in the context of a flexible exchange system.
On October 27, Moldova's central bank decided to lower its key rate to 9.0% from 9.5%, striving to keep inflation rate close to its 5.0% target.
Moldova's consumer price inflation decelerated to 3% year-on-year in September, the lowest rate of increase in 15 months, from 3.6% in August.
Moldova will hold on November 13 the second round of presidential elections when Socialist party PSRM leader Igor Dodon will face pro-European leader Maia Sandu, the designated candidate of a coalition comprising extra-parliamentary Action and Security party, PAS, and the extra-parliamentary Dignity and Truth party, DA.
A poll conducted by Sociologists and Demographers Association from Moldova showed on Monday that 49.8% of Moldovans would vote for Dodon, while 39.7% would vote for Sandu.
This is Moldova's first direct presidential election in 16 years. The new president will be elected through a universal, direct and secret vote following recent amendments to the constitution that closed the way for the election of the head of state by the parliament.
(1 euro = 22.1175 Moldovan lei)