MOLDOVA AWAITING EXTERNAL FINANCING.

Against the backdrop of Moldova’s tumultuous presidential election, the country’s government appears to be drawing close to an agreement on a new lending program with the International Monetary Fund. The Fund’s board of directors is scheduled to meet on Friday, December 15, at which session the government expects the board to approve the Memorandum on the Economic and Financial Policy of the Moldovan Government and the National Bank of Moldova (NBM) (Interlic, December 8). The memorandum, which was drafted by the Moldovan Finance Ministry and the NBM in consultation with the IMF, establishes Moldova’s fiscal and monetary policy framework and structural reform program for 2001. Were the board of directors to approve the memorandum, the way would be cleared for a resumption of IMF balance-of-payments support, in the form of a three-year US$150 million Poverty Reduction Facility (PRF). Moldova has had no access to external balance-of-payments and budget deficit financing since November 1999, when the IMF, World Bank, and other creditors suspended lending to the country following parliament’s refusal to approve the privatization of large wineries and the Chisinau tobacco company.

While the first US$15 million disbursement from the PRF will not be available until the first quarter of 2001, at the earliest, an agreement with the IMF is expected to release crucial financing from other lenders by the end of this year. The release of a US$20 million tranche from Moldova’s Structural Adjustment Credit from the World Bank and a US$10 million grant from the Netherlands government are particularly important. According to Prime Minister Dumitru Braghis, Moldova needs these credits in order to meet its debt-servicing obligations for 2000 (Basapress, November 18). Indeed, the risk of a default on Moldova’s estimated US$965 million foreign debt (which includes US$75 million in Eurobonds) played an instrumental role in the government’s ability to muster the parliamentary support necessary to approve the privatization bill and pass a restrictive state budget for 2001, key requirements of the IMF for a resumption in lending.

Moldova is not out of the woods yet, however. Political uncertainty surrounding the presidential election could prompt the IMF to continue to delay the release of credits despite a favorable assessment of the country’s macroeconomic policy and reform framework. Neither of the two presidential candidates, Vladimir Voronin of the Moldovan Communist Party and Constitutional Court Chairman Pavel Barbalat, secured the necessary sixty-one votes in the 101 seat parliament in three rounds of voting over the past two weeks. With a fourth round of parliamentary voting not scheduled until December 21, time is running short for the government to obtain financing to service its foreign debt.

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