International Monetary Fund. Monetary and Capital Markets Department
The mission conducted a diagnostic review of the financial system and proposes a Technical Assistance Roadmap (TARM) to support the authorities’ efforts to strengthen their detection of risks and vulnerabilities and to enhance capacity in financial sector oversight and development. Two modules were undertaken during this FSSR mission. The financial stability module focused on areas agreed with the NBM and NCFM during the scoping stage: financial sector oversight, financial stability (macroprudential framework, systemic risk assessment, and stress testing), financial crisis management, financial inclusion and capital markets development. The financial sector statistics module focused on key data gaps hampering financial stability analysis as well as statistical reporting to the IMF’s Statistics Department.
This paper presents Republic of Moldova’s Staff Report for the 2021 Article IV Consultation and Requests for an Arrangement Under the Extended Fund Facility and an Arrangement Under the Extended Credit Facility. The 40-month program’s objectives are to sustain the post-pandemic recovery, address pressing developmental needs, and strengthen governance and institutional frameworks. The authorities responded quickly to address the negative macro-economic impact of the combined shocks, focusing on urgently needed policies in support of the healthcare system, social assistance programs, and business activity. The key policy challenge is to design a prudent policy mix to mitigate the impact of the pandemic and pursue developmental objectives without endangering debt sustainability. On the fiscal front, improving domestic revenue mobilization, increasing public spending efficiency, decisively addressing fiscal risks emanating from state-owned enterprises, and continuing efforts to improve budget quality and transparency are vital to improve fiscal outcomes and nurture more responsive and impactful fiscal policy. Structural reforms will aim to address vulnerabilities to improve the rule of law and the anti-corruption framework and strengthen fiscal and financial governance, ultimately accelerating income convergence between Moldova and European peers.