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Nov 08, 2017 15:59 EEST
November 8 (SeeNews) - The International Monetary Fund (IMF) will consider making available to Moldova $22 million (19 million euro) under the current three-year funding arrangement, the global lender said.
"Consideration by the Executive Board is tentatively scheduled for late December. The completion of the review will make an additional SDR 15.7 million (about $22 million) available," the IMF said in a statement on Tuesday.
An IMF team led by Ben Kelmanson visited Chişinău from October 25–November 7 to conduct discussions for the 2017 Article IV consultation and Second Review under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements.
At the beginning of May, the IMF lent Moldova $21.5 million under the country's current three-year $178 million credit facility extended in November 2016.
Moldova has enjoyed a period of relative economic and financial stability since the last Article IV mission, the IMF noted.
"The outlook for Moldova is favorable. Over the medium term, the economy is projected to grow close to 4%, held back by demographic factors," the IMF said.
"In the coming years, effective financial intermediation - facilitated by decisive financial sector cleansing - will be a key domestic growth factor, while sustained recovery of external demand in key trading partners will underpin export growth."
On the back of current fiscal policies, Moldova’s risk of debt distress remains low, with overall public debt dynamics sustainable, the IMF said.
However, significant risks remain: political uncertainty given the upcoming parliamentary elections, macro-financial risks related to delays in decisively cleansing the financial sector, and risks to raising the sustainable growth rate stemming from the challenge of maintaining reform momentum for an extended period.
Continued prudent macroeconomic and financial policies are key to ensure Moldova's sustainable growth.
The momentum for reform must be sustained to accelerate growth and reduce poverty. Although Moldova has experienced moderate growth over the past two decades, its per capita income lags European neighbors, the IMF noted.
A comprehensive approach is needed to improve growth outcomes, including: reforming the public sector, strengthening the rule of law, improving investment in public infrastructure and human capital, and regulatory and institutional reform. In the energy sector transparency, accountability and cost recovery should be preserved.
In addition, efforts to address the shadow economy are welcome and can boost, not just tax revenues, but also labour supply. Also, education reform is key to building the human capital needed to support future growth. Determined pursuit of this agenda, along with effective implementation, is vital, the IMF stressed.
In October, the IMF lowered its forecast for Moldova's 2017 economic growth to 4.0% from 4.5% predicted in April, while maintaining its projection for 2018 growth at 3.7%. In 2016, Moldova's economy grew by an estimated 4.3%, according to the IMF.
Moldova's inflation is seen slowing down to 5.3% in 2018 from 6.5% projected for this year, the IMF said.
Annual consumer price inflation quickened to 7.6% in September from 7.3% in August, according to the latest data available from Moldova's statistical office, BNS.
Moldova's central bank now projects 6.5% inflation in 2017 and 4.4% in 2018.
The IMF expects Moldova's current account deficit to increase to 4.0% of GDP in 2017 from an estimated 3.8% of GDP in 2016, the global lender said in its World Economic Outlook (WEO) report released in October.
Moldova has built its 2017 budget bill on a projection of 3.0% economic growth, to 142.8 billion lei ($7.15 billion/6.74 billion euro). Budget deficit is forecast at 4.15 billion lei, equivalent to 2.9% of 2017 GDP.
($= 0.8646 euro)
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