22 December 2006
EU together with international financing organizations and foreign donors provide 1.2 billion USD to Republic of Moldova

The greatest economic and social event of 2006 took place at the end of the year, on December 12. On that day, during the assembly in Brussels, the Consultative Group of Donors for the Republic of Moldova decided to provide 1.2 billion USD to the Republic of Moldova in the following three years.

Vlad FRUNZĂ

The amount to be allocated by the European Union together with international financing organizations and foreign donors is equal to two state budgets of the Republic of Moldova. The financial means shall be allocated in order to ensure an efficient implementation of „Republic of Moldova – European Union” Action Plan and the Economic Growth and Poverty Reduction Strategy.

The money is to be directed for the development of projects in the following fields: implementation of judiciary system reform, public administration reform, education, health, infrastructure, creation of jobs within the social system, development of rural and agricultural sectors by means of providing long-term credits with a minimal interest rate.

Half of the financial support announced by donors shall be provided as grants

About 50% from the amount of 1.2 billion USD, foreseen to be provided to Republic of Moldova during the years 2007-2009, shall arrive as non-reimbursable financing.

Summoned within a sitting in Brussels on December 12, the Consultative Group of Donors for the Republic of Moldova decided that 25% from the announced amount would be paid as support to the budget and Balance of Payments.

“This level of assistance could cover the necessary short term financing of the Republic of Moldova, particularly the shortage of financing the Balance of Payments for 2007-2008, which appeared as a result of external shocks”, is shown in an official statement of the donors. However, external donors “agree regarding the need of maintaining the rhythm of the reforms for achieving the mid-term objectives”.

The Government and the partners agreed that the extant legislation and the reforms have to be fully implemented. They emphasized the necessity of a well-determined concentration and of a strong political will for the unfolding of the respective reforms. The Government confirmed its strong political commitment for the realization of a large range of ambitious political reforms and for the consolidation of the state of law in Moldova.

The partners mentioned the necessity of further consolidation of the independence of juridical bodies and underlined the importance in this regard of full implementation of the latest laws regarding the juridical system, the Supreme Council of Magistrates and the Association of Bars. They solicit full implementation of the Action Plan and of the Anticorruption Strategy in Moldova, bringing the activity of the Center for Fight Against Economic Crime and Corruption in full correspondence with its purposes.

In addition, Chisinau was asked to end abuse on behalf of legal bodies and inadequate treatment of people in custody and subsequent consolidation of organized crime control.

The Government admitted that in spite of strong economic growth, poverty reduction was stopped in the last years and in the rural areas the level of poverty actually increased.

Continuous efforts will be necessary to encourage the private sector and foreign investment by improving the business environment, enhancing internal competition and solving the constraints for growth. In this regard, the partners emphasized the necessity to continue the frozen reforms from the agricultural sector and, in regard to the recent shock related to the energy price, to improve the efficiency and effectiveness of the social services provided.

The deterioration of infrastructure and the deficiency of public investments remain “a barrier for long-term growth in Moldova”. Also, the Government quota in economy is appreciated as quite big.

The partners praised the authorities for macroeconomic management, which contributed to the economic growth and, until not long ago, to the significant reduction of poverty.

Nevertheless, as the Government remarks – in spite of the recent progress in solving the barriers for exporting wine to Russia – double external shocks had a significant effect on the future economy of Moldova. Affected reputation could limit wine export to Russia for a period of time, while the other shock – increased price of natural gases – is of permanent nature.

Prime Minister Vasile Tarlev:

Brussels reunion is a historical one for the Republic of Moldova. This is because about 10 years elapsed from the last similar meeting, and the amount of 1,2 billion dollars is bigger than the volume of financial assistance given to Moldova by the international donors in the period of 15 years of independence.

To the director of the Department of External Affairs of the European Commission, Hugues Mingarelli:

Moldova has become a trustworthy partner of the European Union and will further benefit from the assistance of the donors in order to edify a stable Moldova at the door of the European Union.

To the Head of Mission, European Department of IMF, Thomas Richardson:

The meeting has proved the support which Moldova has in the processes of unfolded reforms. In the context of external shocks to which Moldova was exposed, IMF foresees the increase of the next installment from the IMF credit up to USD 45 million.

Regional Director of World Bank, Paul Bermingham:

Together with the efficient implementation of the proposed projects, the financial resources from the World Bank could increase substantially.

The Minister of Economy and Commerce, Igor Dodon

50-60% from the external funds will be directed towards investment projects, 35-40% - towards health care and education, and 5% towards actions of certification of local production competitiveness.

Johan Mathisen: IMF will consult the Government to help overcome the consequences of the external shocks

International Monetary Fund (IMF) will delegate to Chisinau an expert, who will have the mission to consult the Government with the intention of to overcome the consequences of external shocks, declared, Tuesday, in a press conference, IMF permanent representative in the Republic of Moldova, Johan Mathisen.

He specified that the expert would propose to the Government solutions for Moldova to be able to face the external shocks caused by the increase of the price for power resources.

Mathisen qualified as successful the decision of the Consultative Group from Brussels on December 12, as a result of which the Republic of Moldova will benefit from assistance in amount of USD 1.2 billion. He also specified that the given assistance by IMF would have as the main objective support of the efforts of authorities in order to reduce inflation and maintain the currency reserve.

The IMF official showed himself satisfied by the actions of the National Bank of Moldova regarding the inflation decrease and the amendment by the Parliament of the Law regarding the State Bank.

Mathisen declared that soon IMF will make public Policy recommendations for 2007, which have as their main objective settling the consequences of the external shocks. This presupposes maintaining inflation rate under 10%. Among the objectives there are: the continuation of a stable budgetary and fiscal policy with a budgetary deficit of 0.5% from the GDP, the continuation of a prudent monetary policy and of decreasing revenue rates.

According to the official, another component of the plan is the significant increase of external assistance.

Mihai Pop: The dependence of the Republic of Moldova from external credits will not grow

Increase of external financing as a result of last week’s decision of the Consultative Group from Brussels, will not enhance the dependence of the Republic of Moldova from external credits, Mihai Pop, Minister of Finance, declared on Tuesday at a press conference.

“The money promised by the external donors does not represent such an imposing sum for the Republic of Moldova, which would make it dependent from exterior injections”, Pop declared.

According to the minister, the USD 1.2 billion financing will have a positive influence on the development of Republic of Moldova, and the external sources of financing will be used mainly for investment projects, especially for the development of infrastructure, health care and education.

The minister said that all financing will be administered by the Government, but the credits will be contracted only under granting market conditions with small revenues.

This material was written based on the news from BASA-press Agency