27 Dec 2019 20:28

Moldova declines IMF recommendations on raising gas prices, freezing pensions - Dodon

CHISINAU. Dec 27 (Interfax) - Moldovan authorities will be focused on national interests when making decisions regarding recommendations from the International Monetary Fund (IMF), Moldovan President Igor Dodon said in a televised interview posted on the Channel 4 website on Friday.

"We need a program with the IMF, but we will take a cautious approach toward agreements with the IMF, considering our national interests. For instance, the government has declined the IMF's recommendation on raising the gas tariff for end users by 30% starting January 1, 2020. How can we agree to raise the gas tariff while its price for Moldova in 2020 will be significantly lower than in 2019? People simply won't understand us," Dodon said.

Speaking of Moldova's "troubled relationship with the IMF," Dodon said Moldova had also turned down another two recommendations by IMF experts, namely not to increase pensions and salaries for public-sector employees and to reduce investment in infrastructure.

"It appears we have to halt investment and limit road repair and construction. But why? Just to get some $40-50 million from the IMF, which would then go anyway to the reserves of the National Bank of Moldova, kept on an account in Washington, without being allowed to spend it as state investments? I believe this is wrong," he said.

Dodon acknowledged that Moldova does need the National Bank of Moldova's reserves in order to guarantee vital imports for three months.

"But the volume of the National Bank of Moldova's reserves is $3 billion, which is several times more than the necessary level for imports [the National Bank of Moldova's current reserves in fact guarantee five months of imports]. We believe it would be reasonable to leave $1.5 billion to guarantee imports and use the rest on investments," he said.

Moldova needs to maintain partnership with the IMF, as this determines its relations with other foreign partners, Dodon said.

"We do need the program with the IMF. But its terms and conditions should be acceptable and mutually beneficial, and our hands mustn't be tied. If they don't want to finance us just because we increase pensions and salaries and make major investments in road construction, we'll take money from someone else. For instance, Russia has offered us a loan for infrastructure development," he said.

Dodon said he had discussed a $300 million loan with Russian President Vladimir Putin a week before, and the parties are currently discussing the details and terms of the loan.

"This loan will be extended based on roughly the same terms as those offered by our Western partners. Otherwise, in such conditions, Moldova would be unable to build roads for another 50 years. The republic is capable of paying salaries and pensions and covering other payments. As for major investment projects, it has to receive loans. All countries do so, and we will do the same," he said.

As reported earlier, the Moldovan government is currently implementing a three-year IMF program, which the previous government led by Prime Minister Maia Sandu extended until March 31, 2020. Incumbent Prime Minister Ion Chicu said, "The government will definitely have a new program with the IMF, which will take into account the interests of Moldova and its citizens."

"If the program doesn't take these interests into account, then there might be a certain pause in Moldova's relations with the IMF," Chicu said.

Moldova signed a Memorandum with the IMF on November 7, 2016. The program is designed for three years and is financed from the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) Arrangements to support economic and financial reforms in Moldova. Under this agreement, Moldova was granted access to IMF resources amounting to SDR 129.4 million, or about $178.7 million. The National Bank of Moldova and the government received more than $115 million of this sum, but then the IMF suspended assistance, after the previous Moldovan authorities took a number of tax policy steps not cleared with the IMF.

In July 2019, the IMF Mission and Moldovan authorities reached an expert agreement on the fourth and fifth reviews of an economic reform program supported by the IMF. The IMF Mission supported the new Moldovan government's request that the cooperation program be extended until March 2020 in order to successfully complete it.

The IMF Executive Board completed the fourth and fifth reviews of Moldova's program through the ECF and EFF at the end of September, which provided the country with access to the next tranche of SDR 33.6 million (roughly $46.1 million). In early October, this money reached the Finance Ministry's accounts, including $27.5 million intended to support Moldova's state budget.