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© 2011 International Monetary Fund
July 2011
IMF Country Report No. 11/200
Republic of Moldova: Third Reviews Under the Extended Arrangement and Under the Three-Year Arrangement Under the Extended Credit Facility, and Request for Modification of Performance Criteria—Staff Report; Staff Supplement; Press Release.
In the context of the Republic of Moldova, the following documents have been released and are included in this package:
The staff report for the Republic of Moldova, prepared by a staff team of the IMF, following discussions that ended on May 12, 2011, with the officials of Moldova on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 28, 2011. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff supplement on the Debt Sustainability Analysis
A Press Release dated July 13, 2011.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Moldova*
Memorandum of Economic and Financial Policies by the authorities of Moldova*
Technical Memorandum of Understanding*
*Also included in Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
REPUBLIC OF MOLDOVA
Third Reviews Under the Extended Arrangement and Under the Three-Year Arrangement Under the Extended Credit Facility, and Request for Modification of Performance Criteria
Prepared by the European Department
(In consultation with other departments)
Approved by Juha Kähkönen and Christian Mumssen
June 28, 2011
Executive Summary
The economy has broadly recovered from the recession, and the outlook is positive. After reaching almost 7 percent in 2010, GDP growth rose further in early 2011, driven in part by exceptionally strong exports. Moreover, core inflation is contained, the structural fiscal deficit has declined, and financial stability has strengthened. On the downside, rising energy prices press on headline inflation, unemployment remains stubbornly high, and persistent political instability takes its toll on the business climate. Nevertheless, the outlook is for robust growth and single-digit inflation in 2011–12, barring further adverse shocks.
The Fund-supported program is on track. All end-March 2011 quantitative performance criteria and applicable structural benchmarks were met. The authorities are requesting modification of two performance criteria for end-September 2011 and end-March 2012.
The key objectives for the rest of the program are to consolidate macroeconomic stability and accelerate structural reforms. The policy discussions focused on:
The pace of fiscal adjustment in 2011–12. The authorities and staff concurred that the 2011 budget, as agreed in the context of the second program review, remains appropriate, and agreed on measures to complete the targeted fiscal adjustment by the end of the program.
The need for further gradual monetary tightening in the face of rising energy prices and strengthening demand. It was agreed that a rise in the mandatory reserve requirement ratio from 11 percent to 14 percent adequately addresses current inflation concerns.
Critical structural reforms. Wide-ranging reforms will support fiscal adjustment, strengthen financial stability, and promote private enterprise.
Contents
I. Recent Developments and Outlook
II. Performance Under the Program
III. Policy Discussions
A. Fiscal Policy
B. Monetary Policy
C. Financial Sector Policies
D. Structural Reforms
IV. Program Issues
V. Staff Appraisal
Boxes
1. The Program at Half-Time
2. Sharing the Costs of IPB Liquidation
Figures
1. Moldova: Economic Developments and Outlook
Tables
1. Selected Indicators, 2008–16
2. Balance of Payments, 2007–16
3. General Government Budget, 2008–16
4. Accounts of the National Bank of Moldova and Monetary Survey, 2010–12
5. Financial Sector Indicators, 2007–11
6. External Financing Requirements and Sources, 2009–12
7. Indicators of Fund Credit, 2008–20
8. Localized Millennium Developments Goals
Attachments
I. Letter of Intent
II. Supplementary Memorandum of Economic and Financial Policies
III. Technical Memorandum of Understanding
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INTERNATIONAL MONETARY FUND AND INTERNATIONAL DEVELOPMENT ASSOCIATION
REPUBLIC OF MODOVA
Approved by Juha Kähkönen and Christian Mumssen (IMF) and Jeffrey D. Lewis and Yvonne M. Tsikata (IDA)
June 28, 2011
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Press Release No. 11/277
FOR IMMEDIATE RELEASE
July 13, 2011
International Monetary Fund
Washington, D.C. 20431 USA
