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Republic of Moldova: Staff Report for 2007 Article IV Consultation and the Third Review under the Poverty Reduction and Growth Facility–Informational Annexes

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International Monetary Fund
Published Date:
April 2008
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Annex I: Moldova—Fund Relations

(As of December 31, 2007)

I. Membership Status: Joined August 12, 1992; Article VIII

II. General Resources Account:

SDR millionPercent of Quota
Quota123.20100.00
Fund holdings of currency137.78111.84
Reserve tranche position0.010.00

III. SDR Department:

SDR millionPercent of Allocation
Holdings0.10N/A

IV. Outstanding Purchases and Loans:

SDR millionPercent of Quota
Extended arrangements14.5811.84
PRGF arrangements86.3770.11

V. Latest Financial Arrangements:

TypeApproval

date
Expiration

date
Amount approved

(SDR million)
Amount drawn

(SDR million)
PRGF5/5/20065/4/2009110.8865.12
PRGF12/21/200012/20/2003110.8827.72
EFF05/20/199605/19/2000135.0087.50

VI. Projected Obligations to Fund1: (SDR million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20082009201020112012
Principal13.8811.795.543.9210.53
Charges/Interest0.910.510.360.340.31
Total14.7812.315.914.2510.84

VII. Safeguards Assessments:

Under the Fund’s safeguards assessment policy, the National Bank of Moldova (NBM) is subject to an assessment with respect to the PRGF arrangement approved on May 5, 2006 and its subsequent augmentation requested in November 2006. The assessment was completed on October 13, 2006 and concluded that safeguards in place at the NBM appear adequate, however, certain vulnerabilities were identified in the governance and control system. Recommendations made to address these vulnerabilities have been implemented according to information received from the authorities.

VIII. Exchange Arrangement:

Moldova has accepted the obligations of Article VIII, Sections 2, 3 and 4, of the Fund’s Articles of Agreement. Its exchange system remains free of restrictions on payments and transfers for current international transactions.

Moldova’s exchange rate regime was reclassified from a de facto peg (to the U.S. dollar) to a managed float in April 2006.

Prior to the introduction of the Moldovan leu on November 29, 1993, the Russian ruble (supplemented by NBM-issued ruble denominated coupons) was the legal tender in Moldova. The government introduced the leu at a conversion rate of one leu equal to 1,000 Moldovan rubles and an exchange rate of one dollar equal to lei 3.85. The leu remained broadly stable around MDL 4.75/$ until mid-October 1998. It has since depreciated against the dollar and traded at MDL 11.32=$1 on December 31, 2007.

Foreign exchange was initially traded on the Chişinău Interbank Foreign Currency Exchange (CIFCE). Operations of the CIFCE started at the beginning of 1993, and daily auctions commenced in early February 1995. An active foreign exchange cash market exists within authorized banks and foreign exchange bureaus. From November 16, 1993 through end-October 1998, the U.S. dollar exchange rate established in the CIFCE was the official exchange rate quoted by the NBM. Since November 2, 1998, the official rate as announced by the NBM is determined as the weighted average of all daily market transactions. The NBM quotes exchange rates of the leu for other currencies on the basis of the leu-U.S. dollar rate and the cross-rate relationships between the U.S. dollar and the currencies concerned in the international market.

IX. Article IV Consultation:

The last Article IV consultation was concluded on May 5, 2006 (IMF Country Reports No. 06/184 and 187).

X. FSAP Participation:

Moldova received an FSAP mission in May 2004; the FSSA was presented to the Board at the time of the 2004 Article IV discussions. An FSAP update mission visited in October 2007; the FSSA update is presented to the Board with the current Article IV Consultations report.

XI. Use of Fund Resources:

On February 4, 1993, Moldova purchased Fund resources totaling SDR 13.5 million, equivalent to 15 percent of quota under the Compensatory and Contingency Financing Facilities (CCFF). This was followed by a first drawing under the Systemic Transformation Facility (STF) of SDR 22.5 million, equivalent to 25 percent of quota, which was approved by the Board on September 16, 1993. On December 17, 1993, the Board approved a purchase of Fund resources under a stand-by arrangement (SBA) in the amount of SDR 51.75 million and the drawing of the second tranche of the STF totaling SDR 22.5 million. On December 19, 1994, Moldova made a second purchase under the CCFF totaling SDR 12.2 million, equivalent to 13.5 percent of quota, in conjunction with the second review of the SBA that expired at end-March 1995. The Board approved a successor SBA for Moldova in an amount totaling SDR 58.50 million (equivalent to 65 percent of quota) on March 22, 1995. Three purchases, totaling SDR 32.4 million (equivalent to 36 percent of quota), were made under the arrangement. An Extended Arrangement amounting to SDR 135 million (equivalent to 150 percent of old quota) was approved by the Executive Board on May 20, 1996. At the time of the third review, the program was extended by one year to May 19, 2000. While the fourth review was completed; the program expired on May 19, 2000 without the completion of the scheduled last review because parliament rejected twice an important program condition. Five purchases totaling SDR 87.5 million (equivalent to 97 percent of old quota) were made under the EFF arrangement. A PRGF arrangement was approved on December 21, 2000 in the amount of SDR 110.88 million (equivalent to 90 percent of quota). SDR 9.24 million was disbursed on December 29, 2000, followed by SDR 9.24 million on February 23, 2001, and SDR 9.24 million on July 26, 2002. The arrangement expired in December 2003 with only one review completed. A new PRGF arrangement was approved on May 5, 2006 (IMF Country Report No. 06/184) in the amount of SDR 80.08 million (equivalent to 65 percent of quota). SDR 11.44 million was disbursed on May 10, 2006. An augmented arrangement was approved on December 15, 2006 (IMF Country Report No. 07/45) in the amount of SDR 110.88 million (equivalent to 90 percent of quota). SDR 31.97 million was disbursed on December 21, 2006, and SDR 21.71 million was disbursed on July 30, 2007, following completion of the second review on July 13, 2007 (IMF Country Report No. 07/275).

XII. Resident Representative:

Mr. Mathisen began his assignment in December 2005.

XIII. Resident Advisors:

An FAD resident advisor, Mr. Agarwal, completed a posting to support the development of the treasury in June 1998. Peripatetic return visits were conducted through 1999. During 1998, Mr. and Mrs. Faulk were assigned as resident advisors on banking supervision at the NBM. During 1999, they paid various follow- up visits as external experts. In July 1999, an FAD resident tax administration advisor, Mr. Vandenberghe, was extended for a third six month period to support the development of a large taxpayer unit. His contract ended in mid-2000. A MCM resident advisor on monetary policy implementation and liquidity management supported the NBM between January and June 2007. A new MCM resident advisor on inflation targeting is expected to take up post during 2008.

XIV. Short-Term Assistance:

Mr. Antao conducted regular visits to assist the Ministry of Finance on macroeconomic analysis since mid-1997. From April 1996 to July 1998, Mr. Richards paid regular visits as a regional balance of payments statistics advisor to Moldova, Armenia, and Georgia. Mr. Van Sluys and Dr. Peeraer visited Chişinău on several occasions in 1998/99 to assist in the area of supervision of commercial bank’s foreign exchange activities. Mr. Thompson has been advising the NBM on accounting issues since 1999 and visited Moldova regularly during the past three and a half years, including for preparation of the NBM international audits. Mr. Ponomarenko visited Moldova several times in 2002–04 to assist the Department of Statistics and Sociology (DSS) in the area of national accounts. Mr. Astin has been visiting Moldova regularly to help the DSS reform the methodology for the CPI and PPI. Mr. Tandberg, the Regional Public Finance Management Advisor for the Countries of Southeastern Europe, has been advising the Ministry of Finance on public finance management since 2006.

XV. Technical Assistance:

The following table summarizes the technical assistance missions provided by the Fund to Moldova since January 2002.2

Moldova: Technical Assistance Provided by the Fund, 2002–07
DepartmentSubject/Identified NeedTimingCounterpart
MAEPayments system; liquidity projection and monetary policy framework; central bank accounting and internal audit; and bank supervisionMay 2002NBM
MFDPayments systemMissions 2003 and 2004NBM
STANational accountsMarch 2002,DSS
Dec. 2002,
March 2003,
Apr. 2004
STAPrice statisticsNov. 2003, Sept 2004,DSS
Nov. 2005, July 2006
STAMoney and banking statisticsApril 2004NBM
MFD/LEGAnti-money launderingApril 2004, Aug. 2006MDA Gov.
NBM
FADModernization of the LTU and VATMay 2004MoF
MFDForeign exchange regulation and banking supervisionDecember 2004NBM
STAMoney and banking statisticsMay 2005NBM, DSS
MFDInternal audit (National Bank)June 2005NBM
STASDDSNovember 2005NBM, DSS, MOF
MFDCentral bank independence, monetary policy, and monetary operationsDecember 2005NBM
FADPublic finance managementMarch 2006, Oct. 2006MOF
FADTax administrationJuly 2006MOF
MCMCentral bank recapitalization and normalizing relations between the central bank and ministry of financeAugust 2006NBM, MOF
MCMImproving monetary policy operations, creating preconditions for an inflation targeting framework and analyzing financial sector stabilitySeptember 2006NBM
MCMDevelopment of the foreign exchange systemSeptember 2006NBM
FADPublic finance managementOctober 2006MoF
FADTax policy reform; follow-up on tax reform implementationMarch-April 2007MoF
LEGAML/CFT law for MoldovaJune 2007MoE, NBM
FADPublic finance managementJune 2007MoF
FADTax administrationSeptember 2007MoF
MCMInflation targetingSeptember 2007NBM
Note: MoF: Ministry of Finance; NBM: National Bank of Moldova; MoE: Ministry of Economy; DSS: Department of State Statistics
Note: MoF: Ministry of Finance; NBM: National Bank of Moldova; MoE: Ministry of Economy; DSS: Department of State Statistics
Annex II: Moldova—IMF-World Bank Relations

(As of January 29, 2008)

Country Director: Mr. Paul Bermingham

Telephone: +380 44 490 06671

A. Partnership in Moldova’s Development Strategy

1. Moldova’s development agenda for 2004 to 2007 had been set out in its Economic Growth and Poverty Reduction Strategy Paper (EGPRSP). The EGPRSP was presented to the Boards of the International Development Association (IDA) and the IMF in November 2004. In December 2007, following a broad-based, participatory consultation process, the Parliament approved the successor to the EGPRSP, i.e. the National Development Strategy (NDS). The President of Moldova promulgated the NDS in January 2008. The NDS will be presented to the Boards of the International Development Association (IDA) and the IMF in March 2008. The 2008 Joint Staff Advisory Note (JSAN) provides the government with advice on future implementation of the NDS. The document describes the participatory process underpinning the development of the strategy, provides a diagnostic of poverty, and presents sector programs and policy measures for sustainable economic growth and poverty.

2. The IMF has taken the lead in assisting Moldova in promoting and maintaining macroeconomic stability through prudent monetary and financial policies. In this regard the Fund has encouraged the Moldovan authorities to implement a policy reform agenda that would attract the needed level of concessional foreign financing from bilateral and multilateral creditors and encourage the international community to reschedule Moldova’s external debt to enhance debt sustainability. The Fund has supported Moldova’s economic reform program since 1993. The last three-year PRGF program was approved on May 5, 2006.

3. The World Bank has taken the lead in the policy dialogue on a number of structural issues relevant to economic growth and poverty reduction, including private sector development, infrastructure, health, education, social protection, and agricultural sector reforms.

4. On October 19, 2006 the Bank Executive Board approved a US$10.0 million Poverty Reduction Support Credit (PRSC) for Moldova. The credit, the first in a planned annual series, aimed to support the Government’s efforts to accelerate economic growth and improve the efficiency of its social programs and public administration. It directly supported implementation of Moldova’s EGPRSP, as well as the EU-Moldova Action Plan. PRSC2 (US$10 million) is currently under preparation and will be presented to the IDA Board of Directors in April 2008. The PRSC program supports selected areas of the Government reform agenda with the objective of: (i) improving the investment climate; (ii) improving the efficiency and management of public resources; and (iii) strengthening pension and social assistance systems. It is expected that the implementation of the reform program supported by the PRSC will contribute to improved business environment and investment climate, leading to an increase in the quality of growth and poverty reduction, particularly in the rural areas. A more professional civil service combined with increased transparency and accountability of public finances with improved public expenditure management and strategic allocation of resources is also an important part of the reform program supported by the Credit. Given the recent increases in the price of imported energy, the PRSC also supports the Government’s efforts in strengthening existing social safety nets for vulnerable groups by completing the 1999 pension reform and improving the targeting of social assistance programs.

5. On December 12, 2006, the World Bank together with the European Commission hosted a Consultative Group Meeting for Moldova. The meeting assessed progress in the implementation of the country’s reform program and provided indications of additional external financing. Moldova’s development partners expressed their support for the authorities’ strategy and indicated financial support totaling more than US$ 1.2 billion (almost 1 billion €) over the next three years, of which 25 percent is in budgetary and balance of payment support.

6. Recent analytical work of the Bank includes a Public Expenditure Management Review, an Investment Climate Assessment, a Country Procurement Assessment Review, a Country Financial Accountability Assessment, a Trade Diagnostic Study, the second Poverty Assessment, an Education Policy Note, a Health Policy Note, an Agricultural Note, a Country Economic Memorandum and a Public Expenditure Review. Bank is also providing technical assistance to the government in the areas of poverty monitoring, public administration and civil service reform and governance, and social protection.

7. In a number of areas—social sectors, environment, infrastructure—the Bank takes the lead in the dialogue. The Bank is also leading in the areas of support for the private sector development and agricultural sector reform. Bank analysis serves as input into the Fund program. In other areas—trade and customs reform, financial sector policies, public sector management—both institutions work together. Finally, in areas like fiscal, monetary, and exchange rate policies, and tax administration, the IMF takes the lead.

B. IMF-World Bank Collaboration in Specific Areas

Areas in which the World Bank leads

8. Areas in which the Bank leads the policy dialogue are social sectors, infrastructure, and environment. In the social sphere, the Bank has carried out Poverty Assessments to monitor and evaluate progress in alleviating poverty. A second poverty assessment has recently been completed. A Health and Social Assistance Project supports the implementation of comprehensive reform of the public pension system and the introduction of a regulatory framework for private pension funds. The project also supports the implementation of the new organizational structure for social insurance. The Bank has also supported two Social Investment Fund (SIF) Projects to assist in the building of local community and municipal capacity and skills through the rehabilitation of social infrastructure. The SIF also focuses on improving the delivery of social services, creating short-term employment and opportunities in rural areas by financing small-scale public works and supporting micro-business development.

9. In health, the Health and Social Assistance Project is focused on improving the health status of the Moldovan population and increasing the quality and efficiency of public health services by improving access to essential services by the poor. The Moldova AIDS Control Project aims at improving Moldova’s health status and assists in achieving the health-related Millennium Development Goals by reducing mortality, morbidity, and transmission of HIV/AIDS. An additional operation to help Moldova combat Avian Influenza is under implementation.

10. In education, the Quality Education in Rural Areas Project supports the Government’s education program to enhance the quality of teaching and learning, increase access and equity, improve the efficiency in public spending for education, and strengthen education planning and monitoring.

11. With regards to infrastructure development, the Bank is concentrating on upgrading basic utility services impacting the population at large and the poor in particular. The Energy II Project has two main components: (i) power system infrastructure—investments to upgrade and rehabilitate metering, dispatch and communications, selected priority rehabilitation of the electricity of the electricity transmission network, and institutional development and regulation of the electricity market; and (ii) heating supply and consumption—investments in improving heating supply and energy efficiency in selected public buildings. A Pilot Water Supply and Sanitation Project is aimed at enhancing the welfare of the population living in some of the poorest rural areas and medium-sized towns and cities by improving the quality, efficiency, and sustainability of water supply and sanitation services by rehabilitating and improving operations of selected water and sewage systems to increase service quality and efficiency, improving the financial viability and commercial practices of the participating utilities, and involving the private sector in the sector. The Moldova Road Sector Program Support Project was approved by the Board in FY07 and a National Water Supply and Sanitation Project is under preparation for Board consideration in May 2008.

12. The Bank has supported a number of environmental projects. The Agriculture Pollution Control Project focuses on significantly increasing the use of environmentally friendly agricultural practices by farmers and agro-industry thereby reducing nutrient discharge from agricultural sources into the Danube River and Black Sea. A number of technical assistance activities are also under implementation. A Biodiversity Strategy Development is assisting the government in implementing Articles 6 and 8 of the Convention on Biological Diversity. The project also supports the formulation and adoption of strategies and actions for the protection and sustainable use of bio-diversity, through a participatory process involving the public and private sectors and local NGOs. The Environmental Infrastructure Project was approved by the Board in FY07. The objectives of the project are to improve the quality of sanitary services in Northern Moldova and reduce the discharge of pollutants, including nutrients into the Nistru River and demonstrate and disseminate cost-effective nutrient reduction strategies and technologies for municipal wastewater sources.

13. In the area of rural and agricultural development, the Bank’s recently closed First Cadastre Project has initiated the first cadastre, implemented a rural land registration system, and helped develop the institutional framework to complete and manage the legal cadastre in urban areas. The project helped establish a system of clear and enforceable ownership rights so as to promote the privatization of land the development of real markets in Moldova. The two Rural Investment and Services Projects (RISP1 and RISP2) increase rural incomes and living standards by promoting rural entrepreneurship, agricultural production, economic diversification, and trade in the rural areas. The projects provide public investment support to alleviate key institutional constraints in farmer’s group formation, supporting development of marketing institutions and infrastructure for improved access to input and output markets, and developing a rural advisory service. The projects also provide investment and working capital at commercial terms to support a broad range of agribusiness. Additional financing to RISP2 is under preparation for IDA Board consideration in June 2008. The purpose of the additional financing is to provide support to irrigation, especially in the wake of the devastating 2007 drought.

14. While the Bank has taken the lead in the areas of the structural reform described above, the IMF has a strong interest in these areas since many of them are critical to achieving macroeconomic stabilization and enhancing growth prospects. Accordingly, there is a high degree of consultation and coordination between the two institutions on these matters.

Areas of shared responsibility

15. The Bank and Fund are working jointly in a number of areas:

16. Private Sector Development. While substantial progress in improving Moldova’s business environment has been made, a challenging reform agenda remains. Both the Bank and the Fund have focused on this agenda in their assistance programs, including SAC III and PRGF arrangement and the surveillance exercise. The Bank has undertaken a number of studies, including the Investment Climate Assessment, the Business Environment and Enterprise Performance Survey (together with EBRD), a Diagnostic Review of the Environment for Foreign Investment, and a number of Costs of Doing Business Surveys, to gauge ongoing developments in this area and determine the most important impediments to private sector development. The Bank’s Private Sector Development II (PSD II) Project strengthened the competitiveness of private and public enterprises in Moldova through the hands-on training of local managers abroad (human capital investment) and creation of a Competitiveness Center (market information and benchmarking). The Competitiveness Enhancement Project builds upon successes of the PSD II credit by providing support for the business environment improvement and modernization of the standardization and metrology system. The IFC has promoted financial sector development by extending credit lines to a number of private banks for on-lending to private sector. The Fund has focused on policies needed to maintain a stable macroeconomic environment and remove obstacles to growth, thus encouraging private sector activities. A number of technical assistance missions have been undertaken to improve banking legislation and banking supervision, including the joint Financial Sector Assessment Program. A joint IMF-World Bank FSAP Update has just recently been completed.

17. In the area of Public Sector Management, the Bank’s Public Economic Management Review, Country Procurement Assessment Review and Country Financial Accountability Assessment examine fiscal adjustment and reform efforts in the social sectors and suggest policy measures to strengthen public expenditure management and actions needed to build capacity for increased government effectiveness. The Country Economic Memorandum entitled Moldova: Opportunities for Accelerated Growth contains recommendations for improving the macroeconomic environment, enhancing the opportunities presented by the large inflow of remittances, creating a more dynamic and diversified private sector. The recently closed Bank project Trade and Transportation Facilitation in Southeast Europe (part of the Stability Pact initiative), aimed to strengthen and modernize the Customs Administration and other border control agencies with the objective reducing non-tariff costs to trade and transport and preventing smuggling and corruption at border crossings. The Public Finance Management Project is helping the Moldovan Authorities to develop a budget planning and execution system by institutionalizing the medium-term expenditure planning and modernizing budget classification, and is assisting in upgrading the internal control and audit system in the central government bodies. The Fund has also provided technical assistance to improve tax and customs administration, government financial statistics, and public expenditure policies.

Areas in which the IMF leads

18. The Fund takes the lead in the formulation and execution of fiscal and monetary policies, external policies, and issues involving economic and financial statistics. In the budgetary area, the Fund leads the dialogue on fiscal matters, taking the lead on tax policy and reforms.

19. In these areas the Bank takes into account the policy recommendations of the IMF and ensures that its own policy advice is consistent.

C. The World Bank Group Strategy

20. The main objective of the Country Assistance Strategy (CAS) for Moldova for the period of FY04-FY08 (November 2004 Boar discussion) is to support the implementation of the government’s EGPRSP and capitalize on the gains of previous assistance programs.

21. A CAS Progress Report was presented for the Executive Board’s review on October 19, 2006. It assessed the implementation of the Strategy and discussed adjustments to the program for the remaining two years of the current CAS period. It was proposed to put in place an annual PRSC program of approximately US$10 million per operation, starting in FY07. The balance of the available IDA allocation would be made available for investment operations drawn from roads, health and social protection, and agriculture and rural development.

22. A CAS Completion and the 2009-2012 Country Partnership Strategy are currently under preparation, the latter of which will include a continuation of the annual PRSC program with a highly selective number of investment operations in the areas of the Bank’s comparative advantage.

Annex III: Moldova—Relations with the EBRD

(As of end 2007)

The EBRD’s strategy in Moldova is aimed primarily at supporting private sector development in the country and increasing policy dialogue with the authorities. In particular, the Bank will pursue the following operational objectives:

  • I. The Bank will continue to pursue investment opportunities in all enterprise sectors including, without limitation, the food processing, manufacturing, information and communication technology (ICT), retail and property sectors. Well performing companies will be provided with direct financing including through ETC instruments. The Bank will facilitate foreign investment either by investing alongside foreign strategic investors or by assisting the development of local companies which in due course may attract foreign investment. Working capital may be provided to agribusinesses under the recently established warehouse receipt system. The Bank will continue to provide non-financial support to private enterprises through its Turn Around Management (TAM) and Business Advisory Services (BAS) programmes;

  • II. The Bank will provide its local partner banks with access to its SME and MSE credit lines, its Trade Facilitation Programme (TFP) as well as its Medium-sized Co-financing Facility (MCFF). The Bank will seek to extend its cooperation to new partner banks and will assist in the development and promotion of new financial instruments such as mortgage financing, leasing and energy efficiency credit lines. On the equity side, the Bank may consider further investment in banks, leasing companies and mortgage providers. The Bank will further enhance its support for the development of microfinance particularly (but not exclusively) in Moldova’s regions. The Bank will explore opportunities to support the emergence of the non-banking financial sector;

  • III. Given Moldova’s sovereign debt capacity constraints and the IMF’s concessionality requirements, the Bank will - to the extent possible - co-finance public infrastructure projects with other IFIs and donors to ensure maximum leverage of grant and concessional financing. To enable Moldova to take full advantage of its new EU neighborhood status, the Bank will give priority to infrastructure projects that promote regional integration and interconnection with neighboring countries. The Bank is also committed to resume its municipal infrastructure lending provided sufficient grant financing can be attracted to address affordability constraints. The Bank will continue to support private infrastructure investments.

Fifty nine projects have been signed totaling €222.2 million of EBRD resources, including: (i) a wine export promotion project, which is targeting the main Moldovan wineries and glass producer, through restructuring of the sector (€24.6 million) and equity investment into a glass producer (€6.4 million); (ii) an energy efficiency project for upgrading the heating distribution networks in Chisinau (€7.8 million); (iii) several credit lines and equity investment for Moldova-Agroindbank for on-lending to small and medium enterprises (€29.3 million in total); (iv) several credit lines, a co-financing facility and equity investment for Victoriabank (€12.5 million in total); (v) three credit lines and a co-financing facility for Mobiasbanca (€6.4 million); (vi) credit lines for Moldinconbank and Banca Sociala (€9.2 million in total);(v) a project for linking Moldovan satellite earth stations to the Eurovision Network (€0.8 million); (vi) a road rehabilitation loan (€9.6 million); (vii) partial financing for construction of a new oil terminal at Giurgulesti (€9.6 million); (viii) credit facilities for micro enterprises through local banks (€5.4 million); (ix) rehabilitating Chisinau’s water services (€17.6 million); (x) Chisinau Airport Modernization (€7.4 million); (xi) trade facilitation program for Victoriabank, Moldova-Agroindbank, Moldindconbank, Mobiasbanca and Banca Sociala (regional TFP—€18.1 million in total); (xii) equity participation in and a loan to ProCredit and a loan to Rural Finance Corporation – two micro-finance companies (€3.2 million in total); (xiii) equity participation and loan financing for three privatized power distribution companies (€26.9 million); (xiv) a loan (MMF) totaling €3.0 million and a credit line of €5 million to Banca Sociala to extend medium-to long-term loans of up to €500,000; (xv) equity and loan participation for SUN Communications (€1.9 and €3.7 million, sequentially); (xvi) a loan facility in the amount of up to €30 million, including €12.5 million for Phase 1 and an uncommitted EUR 17.5 million for Phase 2.; (xvii) DLF Orhei Vit- a financing of new capital investments into the existing facilities and increased working capital needs of the Company through a €4 million facility.

In addition to banking projects, some 79 Technical Cooperation projects have been completed or approved (totaling €13.9 million).

Annex IV: Moldova—Statistical Issues

1. Economic and financial data provided to the Fund are generally adequate for surveillance and program monitoring. In July 2005, a ROSC Data Module found that while the quality of macroeconomic statistics has improved significantly in many areas in the past few years, accuracy and reliability need to be enhanced further regarding compilation of fiscal and national accounts statistics.

2. Moldova subscribed to the SDDS in May 2006, and became the sixth country which has graduated from the GDDS to the SDDS. Participation in the GDDS began in February 2003.

3. National accounts statistics are prepared according to the 1993 SNA methodology. Estimates do not include the Transnistria region for which data have not been collected since 1991. GDP is estimated from the production and the expenditure sides, annually and quarterly. The data are prepared in current and constant (previous-year) prices, and annual data are revised—in two stages—as updated information becomes available. However, the quarterly data remain unadjusted, thus limiting their consistency with the revised annual data. Overall, the national accounts statistics need improvement in the following areas: (i) improving the accuracy of the data sources (quarterly reporting of all basic statistics on a discrete basis, industrial production index and price indices following international standards); (ii) benchmarking the annual and the quarterly data; and (iii) estimating the consumption of fixed capital in line with international standards.

4. Price statistics still have several shortcomings. Price collection for the CPI and PPI is limited geographically and new observations are not imputed. The weights of the CPI basket, underestimate the share of durable goods. The PPI is not a transaction price index, and covers a small population of industrial establishments. The industrial production index is compiled from data in constant prices adjusted to price changes by establishments themselves.

5. Labor market statistics have been substantially revised following the 2004 population census, substantially improving data reliability. While the methodology, training and practices of surveyors have improved, the most substantial revision was the expansion of sampling, thus achieving a more accurate reflection of the labor market situation. No comprehensive attempt has been made to revise the old series based on new methodology.

6. Fiscal statistics. In January 2008, the IMF Government Finance Statistics Advisor for Southeastern Europe at the Ljubljana Center of Excellence in Finance (CEF) visited Chisinau during January 21-25. The purpose of the visit was to develop an understanding of and assess the environment for the production of government finance statistics—both annual and subannual—according to the methodology of the GFSM 2001 and to discuss with the authorities a work program for 2008 in that area. The authorities have indicated a need to review the newly introduced budget classification, which will be undertaken in liaison with the CEF Public Finance Management Advisor. The Advisor also has requested the support of the MoF in reporting of monthly fiscal data (the GFSM 2001 Statement of Sources and Uses of Cash) to STA for publication in International Financial Statistics. In addition, World Bank technical assistance has been provided to improve the budgetary reports of local authorities as well as the Social Fund. The authorities reported annual cash-based data through fiscal year 2006 in the GFSM 2001 format for publication in the 2007 GFS Yearbook.

7. Balance of payments. The compilation methodology follows the fifth edition of the Balance of Payments Manual. Problems remain related to: (i) under-reporting of imports and exports; (ii) collection of data on services; (iii) measurement of private capital inflows, including direct investment data; and (iv) treatment of transactions with Transnistria. Besides the balance of payments statistics, Moldova disseminates quarterly international investment position and external debt statistics. Data on international reserves and foreign currency liquidity are disseminated monthly.

8. Monetary and financial statistics are broadly in line with international statistical standards and of a generally good quality. The NBM has compiled and submitted a complete set of monetary data beginning from December 2001 using Standardized Report Forms (SRFs). Monetary data are reported by the NBM on a regular basis and are being published in the IFS Supplement. An STA technical assistance mission is scheduled for April 2008 to assist in expanding the coverage of monetary statistics to include other financial corporations.

Moldova: Table of Common Indicators Required for Surveillance(As of February 1, 2008)
Date of latest observationDate receivedFrequency of Data6Frequency of Reporting6Frequency of Publication6Memo Items:
Data Quality – Methodological soundness7Data Quality – Accuracy and reliability8
Exchange Rates1/30/20081/31/2008D/MDD/M
International Reserve Assets and Reserve Liabilities of the Monetary Authorities11/26/20081/30/2008W/MWM
Reserve/Base Money1/26/20081/30/2008WWMO, LO, O, OLO, O, O, O, O
Broad Money1/18/20081/30/2008WWM
Central Bank Balance Sheet1/26/20081/30/2008WWM
Consolidated Balance Sheet of the Banking System1/18/20081/30/2008WWM
Interest Rates21/30/20081/30/2008WWW
Consumer Price IndexDec. 20081/14/2008MMM
Revenue, Expenditure, Balance and Composition of Financing3 – General Government412/31/20071/24/2008MMMO, LO, LO, OLO, O, O, O, LO
Revenue, Expenditure, Balance and Composition of Financing3 – Central Government12/31/20071/24/2008MMM
Stocks of Central Government and Central Government-Guaranteed Debt512/31/20071/24/2008MMM
External Current Account BalanceQ3 200711/15/2008QQQLO, LO, O, OO, O, O, O, O
Exports and Imports of Goods and ServicesNov. 20071/11/2008MMM
GDP/GNPQ3 200712/27/2007QQQO, LO, LO, OLO, O, LO, O, O
Gross External DebtQ3 200710/28/2007QQQ

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA).

Reflects the assessment provided in the data ROSC or the Substantive Update (published 03/2006, and based on the findings of the mission that took place during July 17-19, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 7, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment, and revision studies.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA).

Reflects the assessment provided in the data ROSC or the Substantive Update (published 03/2006, and based on the findings of the mission that took place during July 17-19, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 7, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment, and revision studies.

Disbursements made after November 28, 2000—with the exception of disbursements of emergency assistance and loans from the Poverty Reduction and Growth Facility—are expected to be repaid on the expectations schedule. Countries may request the IMF Executive Board to make repayments according to the obligations schedule if their external payments position is not strong enough to meet the repayment expectations without undue hardship or risk. Please note: Repayments under the Supplemental Reserve Facility are scheduled to be repaid on the expectations schedule.

For technical assistance before 2002, see previous reports.

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