Memorandum with IMF missed out at the eleventh hour

Chisinau, 24 September /MOLDPRES/ - Economic comments by MOLDPRES news agency

A mission of the International Monetary Fund (IMF) is for three days in Moldova in order to discuss inclusively policies which may lay the basis of a programme supported by IMF. A thing is for sure that, at the end of the mission, a new memorandum will not be signed. The statute of experts' team was suddenly changed over the night into an uncertain situation, which puts even more questions than providing answers.

More speculations regarding this visit have been made over the past days. Does or does not the government want a new agreement with the International Monetary Fund? Did the resignation of the governor of the National Bank of Moldova (BNM) influence or not on the change of statute of mission? Is it a mission  of negotiations or just talks on policies?

Till a contrary proof, all that has left us is to believe the statements by officials. And, they do not let any other interpretation.

Prime Minister Valeriu Strelet said right after the BNM governor's resignation, on the eve of arrival of the mission, that „the governmental team is fully ready for these talks, which we hope that will complete successfully and will lead to micro-financial stabilisation and normalisation of ties with all development partners”. In early September, the authorities were ready to accept an agreement with the Fund „regardless of hardness of IMF conditions”.

„The government showed openness to discuss possible conditions, which will be developed for Moldova. It might be possibly that these conditions to be rather hard, unusual at certain levels,” Strelet said than. The Moldovan authorities worked out a draft Memorandum, which they hope to be discussed with the new mission. It is expected that, on 6 October, to reach an agreement with the experts team.

It is difficult to believe that the government's position has changed over the night. The Fund asks to be implemented reforms. And, if you postpone them, costs rise up.

That negotiations with IMF will be harder than it was ever expected. Today, in a week, in few months, they will be as harsh as so far. And, conditions will be also intransigent, especially as regards the banking sector found in crisis, as well as management of public money, which was put under austerity regime. In a few months, IMF will not be tolerant anymore and the first question it is to put will be: have been or not removed drawbacks as to policies, which have roots as early in 2013, when the previous programme was not completed.

The banking sector crisis, the state aid provided to those three banks, conditions of transforming it into a state debt, transparency and corporate administration of banks will be only few of problems which will be tackled, regardless when we get to the negotiations table with the Fund.

IMF announced that the present mission would not be a talks one before starting discussions with authorities. It did it in a diplomatic manner. IMF's Resident Representative in Moldova Armine Khachatryan informed that a Fund's team of experts, led by Ivanna Vladkova-Hollar, was on a working visit to Chisinau „in the context of preparations for periodic consultations for 2015, based on Article IV of IMF Statute, as well as in order to initiate talks on policies which might lay the basis of a programme backed by IMF”.

What shall we understand from this press release? The IMF Mission is not one for negotiating a new agreement, but for preparing for talks for another mission for another time. The period when the new experts teams is to come depends on the way the Moldovan authorities prepare their homework.

Another question is: Why was the statute of mission, which was on its way to Chisinau to negotiate, changed? What did happen over the night? On Monday, on the eve of delegation's arrival, Governor of the National Bank of Moldova Dorin Dragutanu and BNM's First Deputy Governor Marin Molosag tendered their resignation. Experts, who were thinking about talks, heard the news when they were already on their way to Chisinau or even upon their arrival. What should they think about this situation? That a partner who, at least, is not correct and serious.

The governor says that he remains in the office for the moment, the parliament is to examine the application of resignation just in three months. A similar situation also happened in 2009, when BNM has no governor during negotiations with IMF. But, at that time, the first deputy governor, who provided the interim, was not resigned. The resignation of two BNM officials, probably, compromised the visit's agenda, which was set and agreed with the Moldovan authorities.

In these conditions, when there is no chance to reach an agreement with IMF this autumn, the 150-million-euro-worth loan provided by Romania is a fresh breath for a suffering economy. Even if this is a loan, the conditions are extremely advantageous, its annual interest rate is of 1.5 per cent. The first installment in amount of 60 million euros will be provided in 2015. It is a support in a difficult period through which Moldova is passing.

But also some unavoidable procedures are to come in this situation, the agreement's negotiation,signing, approval by the government and ratification by the parliament. And, let's not forget that of those 100 million euros promised by Romania in 2010 as non-refundable financing a bit more than half was spent. Again, it depends a lot on Moldova, when it will receive the money.

The Romanian credit, which will be provided by tranches, may help us in the months to come, but does not cover the gap created as a result of blocking by the World Bank and European Union the budgetary support of 45 million dollars and, respectively, 40.5 million euros, taken into consideration when working out the budget for 2015. Thus, the authorities, sooner of later, will be forced to sit at the talks table with IMF.

Moldova also had another long-lasting period 2003- early 2006 when it had no programme with the Fund. But, at that time, no crisis was. The annual growth was of 6-7.5 per cent. The banking sector was strong, was not affected by robberies and public finances were not eroded by problems. Today, the situation is different.

Reporter: V. Bercu  Redactor: F.Galaico