February 28 (SeeNews) - The International Monetary Fund (IMF) on Tuesday raised Moldova's economic growth forecast for this year to 4.5% from 3% and said that is considering providing a $21.2 million (20 million euro) loan under the existent three-year credit facility.
"The Moldovan authorities have continued to make progress in tackling long-standing vulnerabilities in the financial sector and advancing structural reforms. These efforts have helped to restore financial stability, and growth has started to return. The economy is projected to grow by 4.5% in 2017, higher than earlier expected," IMF mission chief in Moldova Ben Kelmanson said at the end of a week long visit in the country.
In order to sustain growth and job creation, Moldova must continue efforts to rehabilitate the financial system, to strengthen the governance and financial condition of banks and to enhance regulatory and supervisory frameworks, the financial institution added.
Moldova has been trying to cope with a major banking crisis since November 2014, when about $1 billion went missing from three of the country's banks. The sum was equal to about 16% of the impoverished ex-Soviet state's 2015 gross domestic product.
“The National Bank of Moldova, BNM, should continue to improve its inflation targeting framework by strengthening operational procedures, forecasting abilities, and policy communications. The BNM should also stand ready to tighten monetary policy if inflation rises more quickly than projected," the IMF said.
In its latest monetary policy meeting on February 22, BNM maintained its key rate at 9.0%, striving to keep inflation close to its 5.0% target. BNM last revised its key monetary rate in October, lowering it by 0.5%, to 9.0%.
Moldova's consumer price inflation accelerated to 3% year-on-year in January, from 2.4% in December. The central bank now projects 5.2% inflation in 2017 and 4.9% in 2018.
As for Moldova's 2017 budget, IMF said that it is consistent with programme targets and support growth-friendly measures, but stressed that key actions ahead include strengthening revenues, improving the efficiency of spending, and effective public administration reform.
Moldova's 2017 budget bill is built on 3% economic growth to 142.8 billion lei ($7.15 billion/6.74 billion euro) and a deficit of 4.15 billion lei or 2.9%/GDP.
The fund also announced that is considering providing a $21.2 million loan to Moldova under the existent three-year $178.7 million Extended Credit Facility and Extended Fund Facility arrangement signed in November.
IMF's executive board will decide on the loan in April, following the local authorities’ implementation of a number of prior actions.
(1 euro = 21.1621 Moldovan lei)