April 13 (SeeNews) - The International Monetary Fund (IMF) said that it has reached a staff-level agreement to boost funding for Moldova by $267 million (246 million euro) to help the country cope with the impact of the war in Ukraine and surging international energy and food prices.
On the heels of the recent energy price shocks and lingering pandemic, the war in neigbouring Ukraine and the international sanctions on Russia and Belarus have significantly weakened Moldova’s near-term economic outlook and prompted a deterioration of its external and fiscal accounts, the IMF said in a press release on Tuesday upon completion of a visit by an IMF staff mission.
The extra funding represents an augmentation of the Extended Credit Facility (ECF)-Extended Fund Facility (EFF) arrangements made in December, and brings the total financing envelope under the programme to about $815 million.
The agreement is subject to approval by the IMF Executive Board, which is scheduled to consider the augmentation request in May, and the first disbursement under the augmented programme of some $149 million would be made available immediately with the completion of the first review and allocated for budgetary support, the IMF said.
“The war in Ukraine has resulted in significant spillovers to the Moldovan economy. Real GDP is expected to stagnate this year, with projections subject to high uncertainty. Disruptions in trade and higher commodity prices are expected to widen the current account deficit to 13.3 percent of GDP this year," said Ruben Atoyan, who led the IMF staff mission during the April 4-11 visit.
"Urgent balance of payments financing needs arising from the escalating shocks are estimated to be about $1.7 billion in 2022-23 and expected to be financed by IMF financing and other donor assistance. Amid temporary liquidity pressures triggered at the onset of the war, the banking sector has shown resilience supported by strong liquidity and capital buffers," the IMF official added.
In March, Moldovan prime minister Natalia Gavrilita announced that the government has requested the IMF to review its current funding agreement so that the arrangement reflects the new economic context.
As of April 11, some 375,343 Ukrainian citizens have crossed into Moldova, out of whom 96,882 have stayed in the country, according to government data.
Moldova's economy is expected to contract by 0.4% in 2022, mostly due to the war in Ukraine, the World Bank said earlier this week, reversing its previous forecast for 3.9% growth. Moldova's economy ministry said in March that the country's economy will grow by just 0.3% in 2022 after expanding by 13.9% last year, with the slowdown mostly due to the war in Ukraine and disruption of global supply chains.
Also in March, the European Bank for Reconstruction and Development (EBRD) said that Moldova's economy is expected to grow by 2% in 2022, lowering its November forecast for 4% economic expansion.
($ = 0.9201 euro)