MOLDOVA PUTS BEST FOOT FORWARD FOR IMF MISSION VISIT.

Despite occasional populist statements implying that Moldova can make it without international assistance, the communist-led Moldovan government has been saying all the right things during the visit from the IMF mission team that began on July 25. The mission, headed by Richard Haas, is surveying the country’s recent economic policies to determine whether to resume IMF lending, which was frozen after the landslide communist victory in the February elections. The IMF is particularly focused on Moldova’s continued fulfillment of the Memorandum on Economic and Financial Policies signed in December 2000 by the previous government and the National Bank of Moldova.

Shortly after the announcement of the IMF mission in late June, parliament began drafting the laws and provisions of the memorandum, thereby demonstrating that it realizes the importance of the mission and its decision. The government has worked long hours and even weekends to consent to laws on free enterprise zones, bankruptcy, fiscal administration, import inspection and privatization. The memorandum’s principle objective is to ensure policies leading to sustainable economic growth and the reduction of poverty.

Mission leader Haas has praised the Moldovan authorities for implementing the memorandum clauses but suggests that there is more work to be done. Amendments, agreed upon by both sides, will be added shortly. Moldovan President Vladimir Voronin is optimistic that the IMF’s final decision, which will come after the conclusion of the mission’s visit on August 8, will be a positive step for his country. In May, the IMF put on hold the three-year US$142 million poverty reduction program agreed to last year. Thus far, only two tranches of US$24 million have been paid out.

The approval of IMF funding is essential for the country’s economic viability because it will serve as a cue not only for other multilateral inflows into Moldova from the World Bank, the European Union, and donor countries, but also for foreign investors. Without these international funds, Moldova would face great problems in financing imports and would likely be forced to default on its external debts, an event that would surely suspend economic growth for years to come. The government budget is expecting at least US$30 million from the World Bank and another US$6 million from the EU in the fourth quarter of 2001, and the communist government would be loathe to cut expenditures should that financing fail to materialize (Infotag, July 27; Reuters, June 19).

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