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Moldova: IMF Team Reviews Situation

Washington, 26 October 1998 (RFE/RL) -- A mission of experts and officials from the International Monetary Fund (IMF) are in Chisinau this week, discussing with Moldovan officials whether it is possible to get the country's reform program with the IMF back on track.

The fund's three year, $182 million loan approved for Moldova in May, 1996, was suspended last year when the country missed the agreed targets for economic performance and progress on reforms.

Around $131.6 million of the loan remains undrawn. IMF officials say drawings could be resumed before the end of the year if the Moldovan government has made adequate progress.

Prime Minister Ion Ciubuc, in Washington last month for the IMF/World Bank annual meetings, said Moldova has been forging ahead with vital reforms, but needs resumed international assistance to counterbalance the effects of Russia's economic collapse.

He said the country's losses following the ruble collapse were equal to five percent of gross domestic product (GDP) or about $100 million. He said the government also wants to discuss the possibility of a special compensatory loan from the IMF to cover it's losses in oil and grain trade due to the Russian crisis.

Moldovan Finance Minister Anatol Arapu told a financial magazine interviewer in September that the IMF credits are "not as important in the financial sense as they are to restore credibility of Moldova in the eyes of foreign investors."

Moldova has one of the lowest levels of foreign investment of any nation in the region, according to IMF and Moldovan statistics. In 1997, foreign investment totaled only $300 million, or 13 dollars per capita compared to $900 dollars per capita in the Czech Republic. Foreign direct investment in Moldova was only $64 million and portfolio investment in private firms was almost non-existent.

One reason is that when the privatization process stalled at the end of 1996, large and important enterprises, especially the more attractive in tobacco, wines and telecommunications, remained state owned. That means the largest part of the Moldovan economy is unavailable for foreign investors.

The lack of privatization was a major target agreed with the IMF which Moldova failed to meet. The IMF's resident representative in Moldova, Mark Horton, says the government has "good intentions" in this area but so far has not achieved very much.

Still, he told journalists recently that the reform process in Moldova is "looking better" and there is a "pretty solid nexus of reformers in the parliament."

One subject IMF officials say they will want to discuss with Moldovan authorities is the situation with Gazprom. Moldova owes more than $600 million to the Russian energy enterprise.

The country's arrears prompted Gazprom to reduce gas supplies by 50 percent in July, followed by warnings in August that Gazprom would henceforth only accept cash payments.

Moldova has in the past paid in barter agricultural products and even given Gazprom a 50 percent ownership in the Moldovan gas line company. But the arrears have continued to build, complicated by the fact that more than half are said to belong to the breakaway Trans-Dniestr region. Gazprom says it's all Moldova's responsibility.

Negotiations with Gazprom, and with Trans-Dniestr leaders, are continuing.

The IMF team will assess Moldova's situation and then return to Washington to confer with senior fund management before recommending whether to resume Moldova's loan program. The final decision will be made by the IMF's Board of Executive Directors.