IMF Executive Board Approves US$235 Million in Emergency Assistance to Moldova to Address the COVID-19 Pandemic
April 17, 2020
- COVID-19 outbreak has caused significant disruptions to Moldova’s economy.
- The approval of Moldova’s request will make available US$235 million to the authorities to meet the urgent balance of payment needs stemming from the COVID-19 pandemic, help catalyze developmental partner support, and address imminent health system needs.
- The authorities are implementing policies aimed at mitigating the economic and social impact of the shock and maintaining macroeconomic and financial stability.
The Executive Board of the International Monetary Fund (IMF) approved a disbursement under the Rapid Credit Facility (RCF) equivalent to SDR 57.5 million (about US$78.4 million, 33.3 percent of quota) and a purchase under the Rapid Financing Instrument (RFI) equivalent to SDR 115 million (about US$156.7 million, 66.7 percent of quota) to meet Moldova’s urgent balance of payment needs stemming from the COVID-19 pandemic.
Moldova’s macroeconomic outlook has deteriorated sharply, giving rise to an urgent balance of payments gap estimated at about US$830 million. The economic impact of the COVID-19 pandemic remains highly uncertain with risks heavily tilted to the downside. The IMF support will help finance the health and macroeconomic stabilization measures, catalyze donor support, and shore up confidence in Moldova.
The authorities’ policies aim at mitigating the economic and social impact of the crisis and supporting the recovery, while maintaining macroeconomic and financial stability. They imposed temporary economic activity restrictions to arrest coronavirus contagion, ramped-up spending on urgent healthcare needs, and introduced business support and social protection measures. The National Bank of Moldova eased liquidity and monetary conditions and is rightly focusing on financial system resilience.
Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
“Moldova’s economic outlook has deteriorated sharply due to the COVID-19 pandemic. Real GDP is expected to fall and public finances are under significant pressure from declining tax revenues and emergency health and social spending. These developments and negative shocks to confidence, lower remittances inflows, and spillovers from global financial channels have created urgent balance of payments needs. The full impact of the crisis remains highly uncertain.
“The authorities responded quickly and comprehensively, including a national state of emergency, a travel ban, and a range of fiscal and prudential measures. The National Bank of Moldova has been ensuring orderly exchange rate adjustment and liquidity provision. These measures should help contain the spread of the virus, support the health and social systems, and protect employment and viable businesses, while preserving macroeconomic and financial stability.
“While downside risks have intensified, public debt remains sustainable with low risk of distress. Beyond the immediate response, the authorities have reinforced their commitment to engage in a governance-focused arrangement with the Fund in the coming months. The IMF stands ready to support Moldova in addressing its immediate and medium-term policy challenges.”
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