July 2 (SeeNews) - The International Monetary Fund (IMF) said it has decided to lend Moldova a further $33.8 million (29 million euro) under the current three-year funding arrangement.
The IMF made the funding available to Moldova after its executive board completed a third review under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements for the country and approved a request for modification of performance criteria, it said in a press release on Friday evening.
In a separate statement on Friday, Moldova's government said that some $22.5 million of the total funding are already in the accounts of the national bank and that it expects to receive the remainder by July 8.
The new tranche is a recognition of the government's efforts to meet the commitments under the IMF agreement, prime minister Pavel Filip was quoted as saying in the statement. The government is determined to complete the reforms it has underway, he added.
So far, the latest allocation included, Moldova has received a total of $113.3 million in four tranches under the current three-year credit facility of $178.7 million approved in November 2016.
"Moldova’s strong commitment to the Fund-supported programme has contributed to a further strengthening of the economy. It is critical that prudent policies are maintained and reforms continue to advance to complete the repair of the financial sector, ensure transparency and stability in the energy sector, and maintain macroeconomic stability," IMF's deputy managing director and acting chair Tao Zhang said, as quoted in the IMF press release. "A strong effort is also required to further improve governance."
According to Zhang, Moldova made significant progress in cleaning up the financial sector, notably by securing transparency in systemic banks and amending the framework to remove unfit shareholders.
However, he stressed, further efforts are required to complete identification of beneficial owners and remove unfit shareholders, to improve banks’ risk management and to address related party issues, including credible time bound plans to unwind excessive exposures.
"On fiscal issues, the 2018 budget amendment accommodates priority infrastructure needs and other social assistance, consistent with program objectives. Priority spending should be protected, the wage bill should be contained relative to GDP, and budget overruns ahead of the elections should be avoided," the IMF official said.
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.
"The 2019 Budget and medium-term framework should remain in line with programme commitments. Tax policy decisions should sustain the agreed revenue path, and the progressivity of the system, while budget slippages associated with unifying the public wage scale should be prevented. More efforts are needed to facilitate the elimination of arrears," he went on saying.
In April, the IMF lowered Moldova's 2018 economic growth forecast to 3.5% from 3.7% projected in October. Moldova's 2019 economic growth is forecast at 3.8%, according to the same estimations.
According to the IMF official, Moldova's monetary policy should continue to focus on maintaining price stability under a flexible exchange rate regime. "It should remain data dependent and the operational capacity of the authorities should continue to be improved. Intervention in the foreign exchange market should be limited to smoothing excess volatility."
On June 5, BNM decided to maintain its key rate at 6.5%, striving to keep inflation close to the target level.
BNM last revised its key monetary policy rate in December, lowering it by 0.5%, to 6.5%.
($=0.8589 euro)