Pessimistic forecast from the IMF: The economy of the Republic of Moldova will decrease by 1.5% this year
At the same time, the IMF reveals that the budgetary-fiscal policy for the year 2023 and agreed with the IMF experts will focus on mitigating the adverse economic and social effects of the invasion of the Russian Federation in Ukraine and those related to the energy shock. In the approved budget framework, priorities will be given to measures taken in response to the increase in living costs and measures to ensure energy security. Mobilizing domestic revenues, streamlining spending and strengthening governance and budget transparency will contribute to strengthening fiscal-budgetary discipline and ensuring debt sustainability. To obtain concessional financing and grants from external development partners, consistent policies and sustained reform momentum will be required.
At the same time, there are significant risks of worsening the situation. High energy prices, disruptions in natural gas and electricity supplies, the escalation of Russia’s war against Ukraine and rising costs of living could worsen the economic outlook, erode confidence and test social cohesion, making the situation even worse and more difficult to take of policy decisions. “On the other hand, the rapid implementation of the reforms envisaged in the program and the continuous support from external partners could contribute to increasing the investment attractiveness of Moldova and to promoting its European integration agenda”, notes the Fund.
The IMF mission led by Ruben Atoyan held discussions in Chisinau and then remotely with the authorities of the Republic of Moldova between October 31 and November 29 in the context of the second evaluation of the program supported by the Extended Credit Facility (ECF) and the Financing Mechanism extended (EFF). At the end of the discussions, the head of the mission of the declaration by the authorities of the Republic of Moldova and the IMF reached an agreement on the level of experience regarding the economic policies necessary to complete the second evaluation of the program supported by the Extended Credit Mechanism and the Extended Financing Mechanism. The agreement is to be approved by the Board of Executive Directors of the IMF, the respective meeting being scheduled for January 2023. The completion of the second evaluation of the program will allow the Republic of Moldova to access 20.65 million special drawing rights (about 27 million USD). ). Thus, the total amount of disbursements made within the program will constitute approximately 287 million dollars.