Following a request by the Republic of Moldova, the European Commission has adopted a proposal for a new Macro-Financial Assistance (MFA) operation of up to €150 million, out of which up to €30 million would be provided in grants and up to €120 million in medium-term loans at favorable financing conditions.
Paolo Gentiloni, Commissioner for the Economy, said: “The European Commission continues to stand by the people of Moldova in these particularly challenging times. Alongside the new IMF program, this proposed new Macro-Financial Assistance would provide both grants and loans at favorable rates to help support the Moldovan economy in the coming two years. As ever, this financing would be conditional on the fulfillment of policy commitments aimed at addressing some of the most pressing problems weighing on Moldova’s economic development.”
The new MFA would build on the two previous MFA operations through which the EU has disbursed a total of €160 million to Moldova since 2017.
The Republic of Moldova continues to face many challenges, notably the need to tackle corruption and governance problems that have contributed to a weakening of the fiscal and balance of payments positions over the past several years, prompting support from international partners. The past year has been equally challenging for the country. Moldova has recently faced a significant energy crisis, which coupled with the post-pandemic recovery has further implications for the economic stability and outlook in Moldova going forward.
The proposed EU MFA, which requires adoption by the European Parliament and the Council before it can enter into force and disbursements can be made, would accompany the country’s new IMF program, approved on 20 December 2021. Specifically, the MFA would help Moldova to cover part of its external financing needs over the coming two years. The operation would thus contribute to reducing the economy’s short-term balance of payments and fiscal vulnerabilities.
Disbursements under the proposed MFA would be strictly conditional on good progress with the IMF program and on the implementation of specific policy conditionality to be agreed between Moldova and the EU in a Memorandum of Understanding. These policy conditions aim to address some of the fundamental weaknesses exposed in recent years in the Moldovan economy and economic governance system, and in other key areas, including good governance and fight against corruption, the rule of law, and energy security. The conditions will be in line with Moldova’s commitments under the program agreed with the IMF and World Bank as well as the EU budgetary support operations and the DCFTA agreement.
