world bank document · date of last cas september 30, 1993 (limited) currency equivalents (april...
TRANSCRIPT
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 15499-ND
MEMORANDUM OF THE PRESIDENT
OF THE
INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
TO THE
EXECUTIVE DIRECTORES
ON A
COUNTRY ASSISTANCE STRATEGY
OF THE
WORLD BANK GROUP
FOR
THE REPUBLIC OF MOLDOVA
April 5, 1996
Country Department IVEurope and Central Asia Region
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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DATE OF LAST CASSeptember 30, 1993 (limited)
CURRENCY EQUIVALENTS(April 1996)
US$1.00 = Lei 4.5
FISCAL YEAR
January - December 31
METRIC EQUIVALENTS
I meter (m) = 3.28 feetI square meter (sq.m) = 10.76 square feet1 kilometer (km) = 0.62 milesI square kilometer = 0.386 square miles
ABBREVIATIONS AND ACRONYMS
CIS - Commonwealth of Independent StatesCEM - Country Economic MemorandumDAC - Development Assistance Committee (OECD)EBRD - European Bank for Reconstruction and DevelopmentEFF - Extended Fund FacilityESW - Economic and Sector WorkFSU - Former Soviet UnionGDP - Gross Domestic ProductIBRD - International Bank for Reconstruction and DevelopmentICR - Implementation Completion ReportIDF - Institutional Development FundIFC - International Finance CorporationIFI - International Financial InstitutionIMF - International Monetary FundMIGA - Multilateral Investment Guarantee AgencyNBM - National Bank of MoldovaNGO - Non Government OrganizationOECD - Organization for Economic Cooperation & DevelopmentSAL - Structural Adjustment LoanSECAL - Sector Adjustment LoanSTF - Systemic Transformation FacilityUNDP - United Nations Development ProgramUSAID - United States Agency for International DevelopmentWTO - World Trade Organization
FOR OFFICIAL USE ONLY
MEMORANDUM OF THE PRESIDENT OF THE IBRDTO THE EXECUTIVE DIRECTORS ON A
COUNTRY ASSISTANCE STRATEGYOF THE WORD BANK GROUP
FOR MOLDOVA
Table of Contents
A. RECENT DEVELOPMENTS ........................................................... 1
B. THE REFORM AGENDA .......................................................... 3Macroeconomic Stabilization ........................................................... 3Private Sector Development .......................................................... 4Public Sector Restructuring and Improvement of Financial Discipline ......................................... 7Poverty Alleviation, Social Protection and Human Resource Development .................................. 8
C. ECONOMIC PROSPECTS AND CREDITWORTHINESS .......................................................... 10Strong Reform Scenario .......................................................... 10Muddling Through .......................................................... 13
D. BANK GROUP ASSISTANCE STRATEGY ........................................................... 14A Three-Pronged Assistance Program .......................................................... 16Portfolio Implementation .......................................................... . 19Box - The Situation in Transnistria and the Bank's Program ..................................................... 20Risks and IDA Eligibility ........................................................... 22
E. AGENDA FOR BOARD CONSIDERATION .......................................................... 22
ATTACHMENTSTable: Framework for the Country Assistance Strategy
AnnexesAnnex Al Moldova - Selected Indicators of Bank Portfolio Performance and ManagementAnnex A2 Moldova - Bank Group Fact Sheet FY 1993-1999Annex A3 Moldova - Summary of Economic and Sector WorkAnnex A4 Moldova - Priority Poverty Indicators, Resources and ExpendituresAnnex A5 Moldova - Key IndicatorsAnnex A6 Moldova - Key Exposure IndicatorsAnnex A7 Status of Bank Group Operations in MoldovaAnnex C l Moldova - National AccountsAnnex C2 Moldova - Exports and ImportsAnnex C3 Moldova - Balance of PaymentsAnnex C4 Moldova - External Debt Stocks and FlowsAnnex C5 Moldova - Public FinanceAnnex C6 Moldova - Monetary SurveyAnnex C7 Projected Arrears, Rescheduling, and Reductions in Debt and Debt Service
This document has a restricted distribution and may be used by recipients only in the performance of their officialduties. Its contents may not otherwise be disclosed without Word Bank authorization.
MEMORANDUM OF THE PRESIDENT OF THE IBRDTO THE EXECUTIVE DIRECTORS ON A
COUNTRY ASSISTANCE STRATEGYOF THE WORD BANK GROUP
FOR MOLDOVA
A. RECENT DEVELOPMENTS
1. A limited Country Assistance Strategy (CAS) was presented to the Board with theRehabilitation Loan (3653-MD) in October 1993. The Bank's initial assistance for Moldova aimedat providing balance of payments financing in support of the Government's reform effort, andhelping the country overcome the consequences of two severe droughts in 1992 and 1994.
2. Moldova is a small, densely populated country with great agricultural potential. It issituated on the western edge of the former Soviet Union (FSU), bordered by Ukraine and Romania.Over 50 percent of the ethnically diverse population of 4.4 million lives in rural areas. Two-thirdsare ethnic Moldovans, 14 percent Ukrainian, 13 percent Russian, 4 percent Gagauz (a ChristianTurkic people), and 2 percent Bulgarian. Endowed with rich agricultural land and a temperateclimate, Moldova's role in the FSU was that of a producer of raw and processed foodstuffs(primarily grapes, grains, wines, fruit, vegetables and livestock). Agriculture and agro-processingrepresent about 60 percent of GDP. The country is almost wholly dependent on imports for itsprimary energy requirements and inputs for its manufacturing industries.
3. Moldova's independence was followed by a period of political instability. In early1992, the year following independence, disagreements over economic policies, together with ethnicfactors. resulted in an armed conflict between the regions on the right and left (Transnistria) banksof the Nistru river. Since the cease-fire in July 1992, the Moldovan Government has made notableefforts to solve differences by peaceful and constitutional means, in both Transnistria and in theGagauz region in the south. The production, trade and transport links between the different regionsare functioning well, and progress has been made on the political front. Gagauz identity has beenaccommodated by partial self-government within the constitution and, aided by an agreement towithdraw Russia's 14th army from Transnistria over a three year period, intensive talks have takenplace on the reintegration of this region into Moldova. On July 5. 1995, the President of theNational Bank of Moldova and the head of the Transnistrian central bank signed an agreement onthe parallel circulation for non-cash transactions of the Moldovan Leu and local coupons on the leftbank of the Nistru river. This appeared to be an important first step towards the adoption ofeconomic reforms in Transnistnra. However, the situation started changing in late 1995. Due toincreased political uncertainty, resulting from the Russian Duma's refusal to ratify the agreement towithdraw the 14th Armny, the momentum towards a settlement of the Transnistria problem hasslowed.
Real GDP Growth
20
1990 1 991 19 19~~99O~99~~ ~9194 199
4. The economy also suffered from a series of shocks that caused a precipitous decline inliving standards. Moldova experienced one of the greatest terms of trade shocks--estimated asequivalent to a 30 percent decline in 1992 income--in the FSU. This was due to the move towardsworld prices in intra-FSU trade, especially for energy. The balance of payments positiondeteriorated sharply, as energy rose from 16 percent of total imports in 1991 to 40 percent in 1994.As a result, the current account deficit increased from US $39 million in 1992 to US $94 million(almost 5 percent of GDP) in 1994. The budget deficit also increased rapidly to 22 percent ofGDP in 1992 and inflation accelerated. reaching 1,200 percent a year. Natural calamities--floods,hurricanes and droughts in 1992 and 1994--further exacerbated the situation. Between 1991 and1994, output and real wages fell by 60 percent. Total employment decreased from over 2 millionpeople in 1991 to around 1.3 million in 1994, although open unemployment remained low at lessthan 2 percent. Living standards fell sharply, poverty increased and the quality of social servicesdeclined.
5. Moldova was one of the first FSU governments to take decisive action to stabilize theeconomy. The drought of 1992 and the armed conflict with Transnistria delayed theimplementation of stabilization policies up to 1993. At that time, however, the Government movedquickly, supported by the IMF, and important progress was achieved. The budget deficit wasreduced from more than 23 percent of GDP in 1992 to around 8 percent of GDP in 1994, mainlyby cutting government spending and transfers to public enterprises from 44 percent of GDP in1992 to 25 percent in 1994. Monetary policy was tightened and a new currency (the leu) wasintroduced on November 29, 1993. These policies led to a reduction in inflation from a monthlyrate of 37 percent in January of 1993 to less than 1 percent in April of 1995. However, in Octoberand November 1995, inflation showed a sudden surge with monthly rates of 3.2 and 6 percentrespectively. This can be only partly explained by seasonal factors and administered priceincreases. Another factor might have been over-estimation of the demand for the leu inTransnistria. The National Bank of Moldova has since tightened monetary policy, and inflationdeclined to 2.9 percent in December, and is now expected to fall to its previous levels.
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Annual Inflation Rate
1400 ... .. .. .. .. .1200
1000 . . . ...8006 0 0 .. .............. ..
400 ............ .o . -. . U I -.,..:-:.~~~~~~ .... .. . ....
200W
1992 1993 1994 1995
6. The Government is also implementing structural reforms, and is achieving goodresults. Enterprise privatization is proceeding at a pace that should ensure that all industrial andcommercial enterprises will be in private hands within two years. Prices are being liberalized andthe legal and regulatory frameworks for a market economy are being put in place. Given the smallsize of its economy and domestic markets, the Government assigns high priority to integratingMoldova into the global economy and opening up the trade regime. In addition to working veryactively with the Bretton Woods institutions, Moldova was the first FSU country to be admitted tothe Council of Europe, it is pursuing WTO membership. and it has signed a trade and politicalcooperation agreement with the European Union. These policies are starting to yield results. Afterfalling by more than 22 percent in 1994, GDP stopped declining in 1995. Helped by a goodharvest, agricultural production has turned around in the last quarter, growing by 4 percent overallin 1995. Industrial production is estimated to have fallen by about 7 percent in 1995. But thereare signs of a tumaround as industrial output in October and November was 7 and 15 percenthigher than in the same months of 1994. Moreover. exports are estimated to have increased by 7percent in real terms in 1995. with the share of exports to non-CIS countries reaching 40 percent.
B. THE REFORM AGENDA
7. The Government's overall objective is to re-establish sustainable economic growth. Thiswill be achieved by allowing the private sector to expand. based on exports and services. Thereform agenda to support this objective covers four broad areas: macroeconomic stabilization;private sector development; public sector restructuring and improvement of financial discipline;and social protection and human resource development. While substantial progress has been madein these areas (paras. 5 and 6), further steps are still required to move the economy onto a path ofsustainable growth.
Macroeconomic Stabilization
8. Moldova has successfully implemented IMF programs beginning with an STF inSeptember of 1993, followed by two Standby programs. While this reflects the Government'scommitment to stabilizing the economy, the success achieved remains fragile. The sudden surge ofinflation at the end of 1995 indicates that Government must remain very vigilant in this area.Control of the money supply and the reduction of inflation were accompanied by the build-up ofdomestic payment arrears. The fiscal deficit was financed, in part, through the accumulation ofarrears, equivalent to nearly 1.4 percent of GDP in 1994: due to public workers, utilities, suppliers
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of capital goods. and to the Social Fund. Similarly. Moldova has had difficulties remaining currenton its payments for energy imports. especially for natural gas.
9. Efforts are underway to strengthen the stabilization program, and the preparation ofa three year EFF is very advanced. The National Bank of Moldova is committed to a monetarypolicy framework that is consistent with the objective of bringing inflation back to less than onepercent a month during 1996. This framework will be supported by appropriate fiscal policies.The Government's fiscal program requires limiting the deficit to around 4 percent of GDP in 1996;it was estimated to be around 5 percent in 1995. The level anid composition of public expendituresare being reviewed. Initial spending cuts were achieved by the near elimination of net lending toenterprises, which was at subsidized interest rates. Now there is a need to examine otherexpenditure items, in order to improve drastically their targeting. Government revenue also needsto be raised from its currenit low level of 17 percent of GDP. Therefore, the Government isreducing tax exemptions, for example the personal use exemptions for imports. Moreover, anumber of legislative and administrative iitiatives are undenvay to provide the basis for a moderntax administration, including: requirements for filing returns and for providing relevant informationwhen requested, an authorization for the tax authorities to assess penalties, and the imposition ofcriminal sanctions for tax evasion.
10. In order to ensure that stabilization is durable it is also necessary to deal with thearrears problem and to harden the budget constraint facing enterprises. There has beensubstantial progress in hardening the budget constraint on enterprises, with tight conditions for newcredit and the withdrawal of subsidies. In the absence of a significant real output response, thepressure resulting from the monetary and fiscal efforts has been translated into an outbreak ofarrears. Foreign debt for energy supplies has accumulated; the financial position of the energyutilities continues to deteriorate; (receivables fall short of payables by over $120m, and manyreceivables are not recoverable), the Government budget has become payer of last resort for energyused but not paid for by households, farms anid enterprises, and is consequently squeezed in itsabilitv to pav wages, pensions and other benefits; bank portfolios carry too many loans in arrearsto slow-adjusting enterprises so that profitable activities are crowded out; enterprisecompetitiveness suffers from too high a level of energy intensity in production. The response tothis problem needs to be multi-faceted. Efforts to promote payments discipline and introducemeters for principal consumlers in the energy sector need to continue. At the same time, theunderlying problem of enterprise adjustment, needs to be tackled through restructuring or closure.Positive efforts are also needed to promote the adjustment of Moldovan enterprises throughtechnical assistanice and dissemination of best practice.
Private Sector Development
11. The Government realizes that growth can be achieved only by unleashing a dynamicprivate sector that can respond to the new market signals. This requires (i) privatization; (ii)establishing a legal and regulatorv framework conducive to pnvate sector development; (iii)liberalization of markets; and (iv) developing the financial sector.
12. Accelerating enterprise privatization is a Government priority. Initially theimplementation of the 1993/94 Privatization Program was slow and came to a virtual halt at thebeginning of 1994 as parliamentary elections approached and the agencies involved became highlypoliticized. However, after the elections, the new Government set up a Ministry of Privatizationand State Property Administration, streamlined the regulatory framework, and mobilized broader
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public support for the program. Enterprises were required to prepare their own privatization plans.As a result, the pace of privatization picked up and the 1993/94 program was completed by mid-1995. This was accomplished through mass privatization, using patrimonial bonds (vouchers).The new 1995/96 Privatization Program was adopted by Parliament in March 1995. Theimplementation of this program would result in virtual completion of privatization of Moldovanindustry and retail within two years. The first part of this program completed the voucherprivatization in November 1995, transferring over 70% of industrial enterprises into privatehands. The Govemment realizes, however, that mass privatization of larger enterprises does not,in the short run, produce the concentration of ownership, new management, or new capitalnecessary for efficiency improvements. Hence, the new Program provides also for cash auctionsand negotiated direct sales to domestic and foreign core investors. The first international tender,for privatization of the tobacco industry, was initiated in December 1995.
13 Land privatization is critical to the growth of the agricultural sector and the wholeeconomy. Land reform and restructuring of farms has proceeded fairly slowly. The first stage ofland refonm, now substantially complete, distributed land for household plots (average size 0.3 ha)to the rural population. The second stage consists of farm privatization. It began in 1992 but wassuspended in 1994 in the face of political opposition. It was resumed in mid-1955 after Parliamentamended the Land Code to extend the circle of eligible people for free land entitlements, limit theminimum size of land allowed to be taken out of a collective fanm, and require that only a"qualified fanner" certified by local authorities can manage any of the newly formed fanms. Those.amendments seriously compromised the rights of individuals to exit from a large-scale fanm and toestablish a new private fanm. As a result, true private fanming--defined as individual fanms andfanmer associations--only covers 3.7 percent of agricultural land in Moldova.
14. Positive steps have been recently taken in the area of land refonr. The Land Codeintroduced post-independence established a moratorium on selling any land received underprivatization and land reform measures until 2001. The moratorium for urban land, as well ashousehold plots and orchards was lifted on January 1. 1995. This measure has already created alimited land market in Moldova. Selling of land shares inside the large-scale farming structureshas recently become possible. and the Govenmment has decided to support the President's proposalto Parliament to pennit immediate trading of rural land parcels. It is now the Govenmment's statedpolicy that fanr land should be treated under law as any other tradable commodity. Moreover, theConstitutional court has declared, in January 1996, the restrictions on exit from the ex-collectivefarms unconstitutional. The Government and Parliament have given assurances that the Court'sdecision will be respected. However, the modalities for implementing this decision still need to bedeveloped.
15. Efforts are being taken to strengthen the legal and regulatory framework for privatesector development. New entrants, foreign as well as domestic, are expected to contribute asmuch or more to private sector development as privatization. This is particularly true in theservice sector, which is beginning to show its potential as a source of growth and employment.New entry has, however, been slow due to: (i) difficult access to urban real estate; (ii) lack of amarket for capital equipment (held by larger enterprises even if unused); (iii) non-transparent andcomplex government regulations at entry, as well as complicated requirements for taxadministration. The Govenmment is starting to address these problems. It is improving thetransparency and simplicity of company registration and licensing, adopting a new streamlinedbankruptcy law and reviewing the collateral law.
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16. Price liberalization for the vast majority of goods and services has been essentiallycompleted. Prices for a small number of public services, electricity and gas remain controlled andmargin controls remain on some basic goods. Export quo-as, licensing requirements and minimumreference prices have been removed. Similarly, import licenses were abolished, except in the casesof goods affecting national securitv and goods subject to medical or cultural regulations. Importtariffs have been frequently modified since November 1993, which created an atmnosphere ofuncertainty and discouraged the expansion of trade. The Government is now committed tomaintaining the new tariff schedule. as introduced on December 1. 1995. This schedule has amaximum tariff of 20 percent except for a small number of luxury goods (audio and videoequipment, and luxury cars). The foreign exchange market was also liberalized and Moldovaaccepted in July, 1995. the obligations under Article VIII of the Articles of Agreement of the IMF,resulting in current account convertibility of the Leu.
17. Liberalization is particularly important for agricultural development. Althoughnecessary, price liberalization alone has not resulted in market and competitive forces that provideefficient-pressures for sector restructuring. In order to increase international competitiveness andefficiency in agriculture. short- to medium-term strategies will also focus on creating a workingmarket both for agricultural products and inputs. Important steps toward liberalizing the supplyand distribution of inputs and outputs were taken with the break-up and inclusion in the 1995-1996privatization program of Cereale and Fertilitatea, the former state trading monopolies for grainsand grain products and fertilizers and agro-chemicals.
18. An efficient and sound financial sector is necessary for private sector development inagriculture and industry. Important strides have been made in this area. The Governmenteliminated directed and preferential credit in mid-1993, leaving allocation of credit and setting ofinterest rate levels to the credit auction. Gradually, new and improved prudential bankingregulations are being introduced, the most important one being the regulation on risk-weightedcapital adequacy. The introduction of the "Law on the National Bank of Moldova" and the "Lawon Financial Institutions" enhances the autonomv and the enforcement powers of the NationalBank. These steps have brought first signs of adjustment in the financial sector. Some banks havewidened their owvnership structure and increased capital bv attracting small private investors.efforts to strengthen the capital base are evident in a number of other banks.
19. However, the balance sheets of many commercial banks continue to have an overhang ofnon-performing loans, reflecting weak financial discipline and rising inter-enterprise arrears whichwere around lei 1.7 billion in mid-1995. This may explain why the spread between bank depositand lending rates have remained high, around 10 percentage points a month in mid-1995. TheNational Bank is responding to this situation by strengthening the banking supervision departmentboth in terms of staffing and training programs. At the same time, new loan quality classificationguidelines have been implemented and banks are now required to publish a monthly statement oftheir capital balances. Agreements with under-capitalized banks have been concluded under whichthese banks are subject to restrictions on their acceptance of deposits, loan activities and paymentsof wages and dividends. Further steps now being implemented in this area include: theintroduction of internationally recognized bank accounting standards; the introduction of improvedreporting requirements and inspection procedures and the development of plans to strengthen thebanks' capital base.
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Public Sector Restructuring and Improvement of Financial Discipline
20. Private sector development muist be accompanied by the restructuring of the public sectorand the redefinition of its role to that of supplying key physical and social infrastructure. In thepresent context of Moldova priority needs to be given to the reallocation of government spending,energy sector adjustment, and re-orienting (he role of the public sector.
21. The Government has embarked, with Bank support, on a comprehensive review ofpublic expenditures, with the aim of identifying the macroeconomic constraints on the size ofpublic expenditure and the deficit; to review the allocation of expenditures; and to improve thebudget process and cost control. On the macroeconomic front, the objective is to identify the fiscalstance consistent with sustained creditworthiness and low inflation. On the structural side, the aimis to support adjustment by identifying and analyzing the structural shifts that need to take place tomake the pattern of Govermiient expenditure appropriate for. and supportive of, a marketeconomy. This will include reconmiendations on the reallocation of expenditures across sectorsand also by type. Finally, the Government is considering institutional reforms needed to implementits priorities and ensure that fiscal policy becomes a more effective instrument. This will meanestablishing the institutions, criteria and mechanisms needed to ensure that Governmentexpenditure is appropriately defined and allocated and effectively controlled. Institutional reformswould also imply greater transparency, which is an important objective in view of the disquietingrumors of official corruption.
22. The financial crisis in the energy sector has escalated into the most seriousmacroeconomic problem currently facing Moldova. The crisis manifests itself most obviouslyin the growth of external borrowing for energy consumption, in particular from external fuelsuppliers and international anid domestic banks. Total net debt for the gas and power subsectors isestimated at US$ 413 million by end- 1995, making Moldova one of the largest energy debtors perunit of GDP in the FSU. The energy debt arises from a complex number of financial issues, butcan be simplified into two main problems: growth of "covered" debt representing non-payment ofenergy bills by consumers, and growth of "uncovered" debt representing financial losses due toinadequate tariffs, unmetered energy, theft, and exchange rate losses. Unless all tariffs, includingresidential ones, are raised uncovered debt could reach US$ 212 million by the end of 1996 evenafter taking into account US$ 52 million of debt relief which Russia's Gazprom has agreed to givein exchange for 51 percent of Moldova's gas transmission assets. This level of uncovered debt willcontinue to be a drain on economic recovery in Moldova, requiring either substantially highertarffs in the future to pay off the debt or additional transfers of prime assets. Moreover, theenergy debt problem has led to frequent energy supply disruptions and higher costs for energy, thuspenalizing viable enterprises as well.
23. The Moldovan authorities and the Bank worked closely to develop a comprehensiveframework for financial rehabilitation of the energy sector. This resulted in an action plan thatwould concentrate first on ensuring that the energy companies can cover their current costs andthen on resolving issues related to prior debts. To limit the growth of "covered" debt theGovernment aims during 1996 at increasing collection to 100 percent of billing, with cashcollection amounting to at least 70 percent of total collection. Concomitantly, the problem ofincreasing "uncovered" debt will be dealt with by setting electricity, gas and heat tariffs during1996 at levels that would cover all cash operating costs, and by end-1997 to cover all costs ofoperation including the costs of production, operations and maintenance, depreciation, interestcharges, a bad debt reserve, and a contribution to profit. Ultimately the Moldovan energy sector
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will benefit from substantial restructuring, commercialization, corporatization and regulatoryreform. In order to set the stage for such far-reaching reforms, the Government has embarked.with Bank support, on a program to upgrade the sector's accounting and information systems.
24. Energy sector refontis have implications for social policies and the public investmentprogram. The strict enforcemilent of payment discipline and higher tariffs is bound to affect poorerhouseholds. Therefore, the Goverrnent will need to introduce a mechanism to ensure supply of alife-line level of energy to vulnerable groups. This could be done through a cash benefit, if aproper targeting mechanism could be developed, or by a life-line tariff for all households. Thesector's poor financial position has also limited the companies' ability to finance necessarymaintenance, which has caused a serious deterioration of assets, increasing costs to the energycompanies. and thus further worsening their financial situation. Therefore, limited publicinvestment in the sector at this stage is critical in order to avoid far more serious problems laterwhich would require more substantial investmenit.
25. The agriculture sector's progress also requires a transformation of its publicinstitutions and services. The development of rural land markets needs complementarygovernment rural services for land-title registration and transfer. The provision of physicalinfrastructure is key to the sector's future development. Hence, it is necessary to improveirrigation, rural roads, rural electrification, telecommunications and rural water supplies. TheGovernment is also considering a better prioritization and rationalization of the public-sectoragricultural research system, and wa's to develop private sector funding and participation inagricultural research. Moreover, the institutions responsible for determining sectoral policies.regulation and public administration require modernization. This would include reviewing: theoverall functions and staffing of the Ministry of Agriculture and Food: the grains' strategic stockspolicy; the wine sector development strategy: food quality standards and inspection, andenvironment standards for agriculture and agro-processing activities.
Poverty Alleviation, Social Protection and Human Resource Development
26. The decline in GDP has led to a sharp fall in living standards. Fiscal shortfalls haveresulted in non-payment or late payment of budget sector wages, pensions and other benefits.Many enterprises are unable to pay Social Fund contributions or wages -- around one-third of theworkforce is on forced leave, or restricted work. For many families, household plots and relativesin the countryside have been the real social safety net. Enterprises undergoing restructuring aredivesting health clinics, kindergartens and other social services to local authorities, who rarely havethe resources to continue operating them.
27. Poverty alleviation is a key objective of Moldova's economic reform program. Workon a ''Poverty Assessment" is starting shortly, with Bank support. This should provide thenecessary information and analysis for policy reforms that aim at helping the poor and protectingvulnerable groups. Economic growth and job creation are necessary for poverty reduction, butmore needs to be done for those who may be left behind. That is why the Government is nowmoving to redesign social policies, and specificallv to improve the targeting of expenditures.Moreover, the health and education systems are being reformed so as to maintain critical humancapital investments during the transition period
28. Reform of social protection is under way. The financing of pensions and other benefitsis particularly worrisome. There were 730,000 people of pension age in 1994 compared toemployment of around 1.300,000, a dependency ratio of 56%. In an attempt to make the socialprotection system more affordable, the Goveniment replaced generalized subsidies on consumergoods with flat rate cash payments targeted to pensioners and families with children to compensatefor increases in the prices of basic necessities. It also disqualified working pensioners from furtherpension increases, and proposed legislation to Parliament to increase the pension age graduallyover time to age 65 for both men and women. The Govermnent also unified the rate of payroll taxbetween sectors and lowered it, In an effort to lower the costs of employing labor. At the sametime it is seeking to improve payroll tax collections so as to reduce the high level of arrears to theSocial Fund and enable further decreases in payroll tax rates. Despite these measures, morefundamental reforms will be needed. The Governmenlt is currently reviewing the pension and socialbenefit system and is developing the regulatory framework for a private savings and socialinsurance scheme, which will complement the increasinglv flat rate state pension and socialprotection system.
29. Moldova's health care sector needs fundamental reform. The sharp decrease in publicresources available for health care, from around 8 percent of GDP in 1990 to 2.6 percent in 1995,will inevitably lead to a deterioration of the health care system. Health indicators and lifeexpectancy are already showing some decline. Disniption of senrices has led to sporadic outbreaksof parasitic diseases and diseases preventable by inmmunization. Cholera has re-emerged. The newHealth Law, adopted in June 1995. recognizes the relative importance of primary health care, andaddresses a broad spectrum of issues, from private sector participation in provision of medicalservices to the development of health insurance. The la,. however, does not set out a clear healthcare reform strategy. In order to stem the continuilig decline of the health care system, theGovernmenit intends to follow up the law by defining a strategy to rationalize sector expenditureand to develop the basic benefits package which will be financed from public resources.
30. The move to a market economy puts new demands on the education system. TheGovernment has adopted an education sector reform strategy that is designed to match theprevailing structure in most Western European countries. This involves: (i) introductioni of a newfour tier pre-university structure; (ii) a complete overhaul of the education program, curriculumand teaching materials at all levels: (iii) reform of teachers' training and retraining of teachers inthe new curricula, and (iv) the introduction of educational standards and standardized assessments.These reforms have been adopted by Parliament and the development of curricula has started forprimary education. The Government now needs to initiate a reform of financing and resourceallocation in education. At present. private sources of funds are being mobilized only on an ad hocbasis, and the allocation of resources among the different levels of education is biased in favor ofvocational and higher education. In addition, spending on educational inputs is not well-balancedresulting. inter alia. in a low student-teacher ratio of around 11 (compared to an OECD average ofaround 18). but, at the same time. severe shortages of text books and other teaching materials.
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C. ECONOMIC PROSPECTS AND CREDITWORTHINESS
31. Moldova's medium-term economic prospects will depend greatly upon the Government'seconomic policies. Growth will come from private sector activity and, in particular, investment.For that to happen, macroeconomic stability, a liberal economy with transparent rules and effectiveprotection of property rights and contract enforcement are critical. The expansion andconsolidation of the policies described above should produce a sustainable growth rate of 5 percentper year. On the other hand, a scenario of "muddling through", which avoids deepening of reforms.would lead to slow economic growth, essentially stabilizing the economy at its present low level ofoutput. This scenario would leave serious doubts about the country's creditworthiness.
Strong Reform Scenario
32. With strong reforms, output, income and living standards could start rising at anannual rate of 5-7 percent. Continued strong stabilization would imply a gradual reduction of thefiscal deficit to less thani 3 percent of GDP by 1998. This would be consistent with a rigorousmonetary stance and a decline in inflation to 5 percent per year starting in 1998. Macro-economicstability. together with liberalization, privatization and institution building will encourage privateentrepreneurs to begin investing. Thus the investment rate, which is currently around 5-6 percentof GDP, would at least double and could reach comparable levels to Poland (16 percent in 1993),the Czech Republic (17 percent in 1993), or Slovenia (20 percent in 1993). Initially, growth islikely to be in services, such as retail trade and transportation, where the legacy of central planninghas left a great deal of unfulfilled demand and where the required investment is typically small.The sector could grow at 10-15% a year, and its share in GDP could increase from around 30percent in 1995 to around 50 percent- the share of services in GDP is around 58% in Slovenia,55% in Poland and 54 % in the Czech Republic. Such an expansion in services will require thatthe private sector be able to purchase or lease real assets (land and office space) and that a stablelegal and institutional framework for doing business is in place. Land reform, free markets forinputs and outputs, and adequate support services for private farmers would be critical to theexpansion of agriculture. The sector could grow at around 2-3% a year over the medium-term.Industry, especially export-oriented agro-processing, would pick up in tandem, growing at more orless the satne rate as agriculture. The relatively small size of Moldova's market implies that thisrapid growth could only be achieved through greater outward orientation. Annual growth rate ofexports would be around 6-7 percent over the medium-term. Maintaining a liberal trade regime iskey to this export expansion. The social situation would improve dramatically. The unemployedwill benefit from the expansion in job opportunities, mainly in the service sector. As the labormarket tightens, real wages would begin rising to reach their 1991 level in 5-7 years.
33. This scenario shows significant financing needs over the medium term. The currentaccount deficit will come down steadily, but will still be around 4% of GDP till the year 2000, duepartly to the rise in investment to improve competitiveness, both in existing and new production.Thus, the stock of debt would reach a peak of nearly 40% of GDP by 1998, with the debt serviceratio exceeding 20% in 2002 and 2003. These creditworthiness indicators are acceptable, but doindicate risks. It is important to realize that Moldova is presently only $5 per capita over theoperational cut-off for IDA. Since economic growth is expected to resume, Moldova will remainan IBRD-only country, which is justified by the debt indicators mentioned above. However,Moldova's creditworthiness remains highly vulnerable to further adverse external shocks. If. inspite of a liberal reform stance due to shocks, growth does not materialize as expected and
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Moldova remains below the IDA eligibility threshold for a number of years, the issue ofcreditworthiness and access to IDA would be reviewed separately.
ThbI~ 1. Maui E~on~mk In4kators5. .* .:9 - Rap .: ...... l...~~ ~ .. . . .. . . .. . . .. . ..
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2()04 205
G:rowvth rate ot (;I)E' (mp) -22.2 0.0 5.0 7.0) 7.0 6.5 6.0 6.0 5.5 5.0 5.0 5.()0I)omestic Investment / (' 6.4 5.4 7.6 10.4 13.0 15.8 17.9 19.2 19.4 19.4 19.4 19.5 l
overnen.t 1.5 2.4 3.9 4.9 4.8 4.7 4.7 4.4 4.4 3.9 3.9 3.9.Non-govenunlent 4.9 3.0 3.7 5.5 8.2 11.1 13.2 14.9 15.0 15.5 15.5 15.6l
Natio.al Savin.gs /.(l)' 1.3 . .1 1.9 4.9 8.3 11.4 13.8 15.4 16.1 16.7 17.2 17.4 Fiscal Balanlce /(iI)1' -8.1 -5.1 -4.1 -3.1 -2.9 -2.8 -2.8 -2.3 -1.7 -1.2 -1.4 -1.6l
G;rowvth rate of Real per capita C onsulmptionl -0).5 2.4 3.1) 2.5 1.9 2.3 3.2 3.9 3.4 3.5 3.6l
Inflationl (period average) 369.5 24.4 10.0 7.5 5.0 5.0) 5.0 5.0 5.0 5.0 5.() 5.0l
Real Export (;rowth 7.0 6.6 7.2 7.6 7.3 7.0) 6.5 6.4 6.3 6.1 5.9lReal hnport G;rowvth 3.3 6.7 5.6 5.1 5.0 5.1 4.9 4.1 3.5 3.5 3.6lCurrenlt Accolunt Balanlce / (;I)E -5.1 -5.3 -5.6 -5.4 -4.8 -4.4 -4.1 -3.8 -3.3 -2.7 -2.3 -2.1lForeign Exchanlge Reservesl
(I.S$ millions) . 179 197 143 154 164 176 189 203 215 228 241 257l(In Months oflhnports) 2.9 3.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.1)l
Ext. I)ebt (IJS$ mlillionis) 493 588 808 953 1073 1137 1177 1212 1226 1223 121() 1198lExt. I)ebt / (:;)E 25.7 27.4 35.2 38.1 39.3 38.2 36.5 34.7 32.6 3(1.3 27.9 25.8lExt. I)ebt /X(:S 7').3 87.3 110.7 120.6 125.6 122.7 117.1 111.8 105.0 97.3 89.6 82.8lI)ebtService/X(:S 3.9 14.1 10.8 13.7 18.3 17.6 17.7 19.6 20.1 20).1 18.6 16.5l
34. Economic growth, export expansion and increases in savings are key to the improvement indebt indicators that could occur at the turn of the century. As GDP growth rises from 0 percent in1995 to 6 percent in year 2000, exports grow at 7 percent a year in real terms, and the savings rateincreases from 0.1 percent in 1995 to 16 percent in the year 2002, Moldova's creditworthinesswould improve dramatically. Under those conditions, the current account deficit could decline to 2percent of GDP by 2005. Moldova would be able to attract sufficient private capital in the form ofdirect or portfolio investment to finance its deficit. As a result, the stock of foreign debt wouldstabilize in nominal terms and decline as a proportion of GDP. Finally, the fiscal performance willbe key to raising savings and improving creditworthiness. The Government is undertaking strongefforts to improve revenues, which will support the effect of expenditure cuts through sharpersetting of priorities. A positive sign is that the experience in the sale of Government bonds sincethe first offering in July 1995 shows that the Government is able to raise domestic resources tofinance part of its deficit.
-. I. I
Table 2. Burden Sharing Assumptions and Exposure Indicators
1995 1996 1997 1998 2004Gross Flows (S million)Bank 48.0 38.3 43.5 50.8 54.0IMF 65.0 71.0 68.0 68.0 00.(EBRD 6.0 19.0 19.0 13.0 20.0Bilaterals 39.3 68.0 46.0 45.1 34.4Other 0.0 53.3 16.3 17.7 13.6Total 158.3 249.5 192.9 194.6 122.0
Exposure Indicators (%)IBRD DS/ public DS 8.5 13.3 13.4 13.6 30.2Preferred DS/ public DS 60.2 49.1 60.0 84.2 61.8IBRD DS/ exports 1.2 1.4 1.8 2.4 5.3
35. The Bank and other preferred creditors would be taking an extraordinarily highshare of the financing burden, especially in the initial years. This reflects the fact that Moldova,as a non-DAC cotntry with marginal creditworthiness has very limited financing sources available.The responsibility of the intemational community to provide the Government with the necessarysupport to implement its ambitious reform program falls largely on the shoulders of the preferredcreditors: the Bank, the IMF and EBRD. Russia has been a major source of bilateral funding, byend 1994 it had disbursed more than $100 million in credits to Moldova. Japan (JEXIM) co-finaniced the Rehabilitation Loan in the amount of $40 million, and the EU has supplied two quickdisbursing loans (ECU 25 million and 20 million), in addition to technical assistance. Othersupport has been forthcoming from the United States, China, Germany, the Netherlands andRomania. The Bank has made significant efforts to raise other resources (see the section on donorcoordination), and will continue to do so. This will be done both by seeking co-financing for Bankprojects, and bv using innovative approaches. like the Pre-export Guarantee Facility. Even withthose efforts, however, the prospects for attracting alternative financing in the short term aremodest.
36. As table 2 indicates, the guideline on the share of preferred creditors' debt service in publicdebt service is already exceeded by a wide margin. Under a base case lending assumption (seesection D). the Bank's share in total debt service would exceed guidelines around the year 2000.On the other hand, overall creditworthiness indicators and the ratio of IBRD debt service to exportsremain acceptable. The initial effort by the preferred creditors is justified because the reformsshould allow Moldova to reach a sustainable growth path, enabling it to attract private sources offinancing and foreign direct investment. A reduction in IBRD lending, to remain within exposureguidelines, would imply a serious cost to Moldova and a reduction in its growth prospects. Thiswould be particularly unfortunate at a time when the country is implementing a strong reformprogram.
37. A strong reform program is necessary for Moldova to achieve the growth ratesdescribed here, but there is a risk that the desired growth rate may not be reached despitegood policies. Factors beyond the Government's control could lead to lower than expectedgrowth. For example, Moldovan products could be subject to protectionist policies in importingcountries. In this case the export expansion that is necessary to sustain Moldova's growth may notmaterialize. Or, foreign financing may not be forthcoming, which could result in lower investment
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and growth than envisaged here. The timing and magnitude of the private sector response to thenew policy framework are difficult to predict. In some countries private activities have expandedrapidly in response to reforms, but in others uncertainties about economic or political factors haveslowed private investment. Thus the mere implementation of a strong economic reform programncannot guarantee that Moldova will achieve the 5-7 percent sustainable growth rates achieved byother reforming countries. On the other hand, failure to reform will undoubtedly lead to adisastrous economic outcome.
Muddling Through
38. The situation changes dramatically if reforms are not implemented. Without addressingthe main remaining obstacles to economic growth, the economy would continue to be too energyintensive and production structures would be too inflexible to adjust to market signals, stiflingprivate sector initiative, and making competitiveness on export markets an elusive goal. The resultof this scenario could be stagnation at a low level of output, comparable to that of today. Thismight even be too optimistic, because Moldova would have great difficulties financing the largeextemal deficits that would occur under such a scenario, so output may continue to decline. Ineither case, Moldova would drop to the ranks of the lower income countries for a significant periodof time.
39. In the absence of structural reforms the needed expansion in investment would notoccur, as the environment would not be conducive to private sector activity. Under this scenariothe investment rate is unlikely to rise above 3 percent of GDP. Growth would remain low at 0.5-1.5 percent a year. Moreover, as competitiveness would not be enhanced, export growth would besluggish, around 1.5 percent a year, and the required change in the structure of the economy wouldnot take place. Living standards would not improve. Real private consumption would grow at lessthan I percent a year, and may even decline over the medium term. Poverty would continue andprobably deepen. The human cost of not carrying out structural reforms could be very high, aseducation and health standards would continue to decline.
40. Moldova's creditworthiness under this scenario would be weak, as it will be difficult tokeep a stabilization program on track. The current account deficit would remain at around 5.0percent of GDP. The debt to GDP and debt service ratios would grow to 50 percent and 30percent respectively by 2005. This implies that muddling through may not be a real option. It isextremely doubtful whether Moldova would be able to attract sufficient external resources tofinance its import needs. Without reforms, the current account deficit would not be financed.Preferred creditors typically require a coherent economic framework prior to lending, and privateentities would not have sufficient confidence to invest in Moldova or lend to it. Hence, althoughMoldova might become IDA eligible under this scenario, poor policy performance would likelyresult in its IDA allocation being very low. The pressures would be very high on government toresort to deficit spending and on the Central Bank to print money. In this case even stabilizationand creditworthiness gains would not be sustained, leading to a return of hyperinflation andnegative growth.
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19)94 1')9)5 1'996 1997 199S 1999 2000)( 200(1 200{2 200(3 200(4 200(5
GTrowth) rate ot(:;l)l' (mlp) -22.2 0().( I.5 I.8 1.7 1.5 1.0) 0.8 ().5 0).5 0.5 0.5D)omestic Investmenit / (:il)l' (6.4 5.4 3.(1 2.9 2.9) 3.0) 2.2 1.4 1 .8 I .X 1.8 I.8
Fixed hivestinent 6.4 5.4 3.01 2.9 2.9 3.0) 2.2 1.4 1.8 1.8 1.8 1.8(Aovenunlent 1.5 2.4 2.4 2.3 2.0) 1.9) 1.7 1.3 1.4 1.3 1.3 1.3Non-g:ovenunenit 4.9 3.11 0.7 (.6S 0).9 1.1 0. 4 0.1 0.4 (1.4 0.4 0.4
National Savings / (;I)P 1.3 (1.7 -I1.8 -1.8 -1.8 -2.1 -2.5 -2.9 -2.8 -2.9 -3.1 -3.4Fiscal Balance /(:;)1' -8.1 -5.1l -5.3 -4.3 -4.1 -4.9) -6.4 -8.1 -8.5 -10).2 -13.6 -17.6
G;rowth rate of Real per capita -(1.5 2.7 1.3 1.3 0).9 (1.9 11.5 -(1.2 -(1.1 -0).1 -(1.2C'onsumilptionz
Inlflation (period average) 369.5 24.4 15.() IS.(1 15.0 15.0 2().(1 25.1) 28.0) 3(1(1) 4().() 40).0)
Real Export(:;rowth 7.1) 1.9 1.9) 1.4 1.4 1.3 I1.3 1.3 1.1 1.2 1.2Real Imiport (:rowth 3.3 -().5 1 .() 1.2 1.1I -11.5 -11.7 1.1 0(.3 0.2 -0.1Currenit Account Balanice / (;I)I' -5.1 -4.7 -4.8 -4.6 -4.7 -5.1 -4.7 -4.3 -4.6 -4.7 -4.9 -5.2Foreign Exchlange Reserves
(1.JS$ millionis) 179 257 2()() 190 1811 15() 100( lOt)0 10)0 10l) 1()0 101)(hiMontblsofimports) 2.9 3.9 3q.0 2.8 2.6 2.1 1.3 1.3 1.3 1.3 1.2 1.2
Ext. I)ebt (IIS$ millionis) 493 588 783 893 100l 10:51 10:70 1132 12()2 1280 137() 1475Ext. I)ebt I (;1)1' 25.7 27.4 35.2 38.9 41.9 42.4 41.9 43.() 44.4 46,1 48.() 5(1.3Ext. I)ebt / X(;S 79.3 87.4 111.9 124.2 136.5 14(.1.) 138.8 143.5 148.5 154.4 161.4 169.9I)ebt Service /X(:;S 3.9 14.1 11.3 14.3 19).4 20).2 21.7 24.8 27.1 28.5 29.1 30.2
D. BANK GROUP ASSISTANCE STRATEGY
41. The Bank Group assistance strategy aims at supporting the implementation of the reformagenda outlined in section B. This agenda will establish a firm basis for sustainable private sector-led growth based on (i) increased competitiveness, notably in the exports of agricultural goods andin agro-processing, (ii) improved energy efficiency, (iii) the rapid emergence of a service sector.and (iv) quality investment in the country's human resource base.
42. While Moldova's track record in implementing reforms is solid, the momentum of thereform process is one of pragmatism rather than idealism. This reflects the realities of the politicaleconomy in Moldova: the Government has consistently pursued a strategy of consensus buildingand balancing of different forces, both internally and externally. With the upcoming presidentialelections in the Fall of 1996, less consensus is likely in the immediate fluture, but expectations arethat it will re-emerge quickly after the elections. The Bank strategy will therefore aim at providinga constant push to making progress in critical reform areas, while recognizing the need to balancecompeting interests. An important element in that strategy will be "constructive engagement"through small projects in key sectors in order to provide momentum to the dialogue at sectorallevel.
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43. The base case for Bank assistance in the CAS is therefore one of continued strongcommitment to reforms and a high level of support. Since in practice the speed of reforn indifferent sectors will vary, this base case is designed to respond flexibly to developments on theground. The Government anid the Bank would work on the preparation of a lending program forFY96-98 of 11 projects totaling US $290. The actual implementation of specific investmentprojects, however, would depend on satisfactory progress in each sector. Delays in meetingindividual project conditions could lead to corresponding delays in project processing, thuslowering the total lending voluime for the CAS period.
44. Agreement on a program for a second Structural Adjustment Loan (SAL 11) and itsimplementation are the triggers for the base case. The key measures to sustain the momentumof the reform agenda and justify the level of support envisaged in the base case. would besupported bv SAL 11. While the precise SAL 1I program still needs to be defined, its maincomponents would be as follows:
* maintaining a stabilization program supported by the IMF;* completing enterprise privatization:* carrying out land reform. particularly: implementing the Constitutional Court's decision
removing restrictions on exiting large-scale farms, and fully liberalizing the land market:* maintaining a liberal trade anid price regime. particularlv: abolishing remaining margin controls
and keeping the maximum tariff at 20 percent (except for a small number of luxury goods);e improving financial discipline in the energy sector by increasing tariffs to cover full operating
costs. raising cash collections to comparable international levels, and maintaining "lifeline"energy supplies to vulnerable groups;
* improving safety and supervision standards in the banking sector and withdrawing Governmentguarantees on commercial loans,
* hardening the budget constraint for enterprises, and promoting enterprise adjustment includingvoluntary liquidation of unviable enterprises remaining in State ownership: and
e improving targeting of social benefits, eliminating arrears on benefits payments and settingpriorities in spending for health and education.
45. Without these measures, grovth would not be sustainable and creditworthiness would belimited--see the description of the muddle through scenario in section C. The Bank's programwould move to a low case. The lending program would not exceed $75 million for the three yearperiod, divided over five projects. These projects would support a limited core program in theareas of private sector development, agriculture and land reform, energy, and education. For eachproject to go ahead. the Bank would still have to be satisfied that the policy framework in therelevant sector would allow the expected benefits of the project to materialize. The Private SectorDevelopment Loan has already been approved by the Board. Satisfactory implementation ofenterprise privatization was an important trigger for this operation. The key sectoral triggers forthe other lending operations in the low case are as follows:
* energy: agreement on a new tariff structure to improve cost recoverv and on collectionstargets,
* agriculture: agreement on an agricultural research program and on reforms of institutionsresponsible for carrying it out:
* education: agreement on programs for curriculum development and teacher retraining: and* cadastre: agreement on reforms of the land market.
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Table 4: FY96-FY98 Lending Program
Base Case Low CaseFY96 FY96Private Sector Development $35 iln Private Sector Development $35 mlnEnergy (aiid Environment) $10 nlnAgriculture I $10 miln
FY97 FY97SAL II $50 Tln Energy (and Environmenet) $10 mlniCadastre $10 mndn Agriculture $10 mlnEducation $10 nlnAgriculture II $45 muin
FY98 FY98Energy $40 mln Education $10 mlnTramsport/Export $40 ni Cadastre $10 milPromotionIrtrigation $40 inii
A Three-Pronged Assistance Program
46. Moldova's past and present performances indicate that the base case is the most likelyscenario. Under the circumstances, the Bank group will support the implementation of all threeelements of the Government's reform agenda with projects, programs and activities covering:private sector development; public sector restructuring and improvement of financial discipline;and social protection and human resource development.
47. The Bank will support the Government's program for private sector development.Now that the privatization of enterprises is largely completed, the Bank group's assistance programwili focus on: strengthening of the legal and regulatory environment for the private sector, theprovision of financing for investment and working capital for viable activities, and the facilitationof the flow of external private financing. An area of special attention will be the agriculture sector,the key sector in the economy, where private sector development is not yet very advanced.
48. The second Structural Adjustment Loan (SAL IT, will be the main instrument to supportthe strengthening of the legal and regulatory framework for the private sector. The progranmwill focus on improving the transparency and simplicity of company registration and licensing,establishing a functioning mechanism for bankruptcy, and implementing the court reform whichprovides for inclusion of the economic courts (the "arbitraj" courts) as specialized courts within aunified court system with a single supreme court. In addition, assistance will be provided, togetherwith USAID, for the conversion of enterprise and commercial bank accounting to internationalstandards.
49. The Private Sector Development loan has created the basis for strengthening the financialsector and putting in place financing for investment and working capital. This program is alsosupported by EBRD, which has put in place lines of credit through two different commercial banks(Victoria Bank and Agroind Bank). The Bank and the Government are discussing the possibility offollow-up PSD operations if progress in implementing reforms warrants them. The possible
- 16 -
establishment. by IFC, of a leasing company will reinforce these efforts. In addition, supervisionand prudential regulation of the banking system has made significant progress, supported by boththe SAL, and IMF programs and technical assistance. These efforts will be continued under SALII. focusing on creating a baniking system that can play its full role in allocating resources, allowingthe Government to phase out its guarantees for commercial loans.
50. An area of specific concern is the facilitation of the flow of external private financing.Moldova is not very well-known to potential investors. Actual paid-in foreign direct investmentwas only around $30 million by October 1995. Nevertheless, profitable opportunities for privateinvestors do exist and are being enhanced, as the Government puts in place the appropriate policyand regulatory framework. The Pre-export Guarantee Facility is an attempt to attract privateforeign financing in an area, the foreign exchange and trade regime, where regulatory reforms arealready in place. As other such areas emerge, the Bank will continue to pursue opportunities forattracting foreign financing through use of the Bank's guarantee instrument and co-financingtechniques. The policy dialogue in different sectors will be focused on building the foundation forsuch interventions by improving financial discipline and the regulatory framework allowing privateparticipation and operation. In addition, the Bank is actively supporting the Government inmarketing Moldova to foreign investors, for example through its participation in a major investor'sconference in Chisinau in September 1995, and Moldova's participation in the Pilot Program ofSeminars at the 1995 Bank/Fund Annual Meetings.
5 1. Over time. IFC and MIGA will play an increasingly important role in attracting foreignprivate financing to Moldova. Neither MIGA guarantees nor IFC investments have been made todate. Recent IFC raissions have identified a number of prospects, including small investments inagro-business and the expansion of a metal treatment and processing plant. Privatization of thetelecommunications network could provide good opportunities at a later stage. In the technicalassistance area, IFC has approached a number of prospective donors for support to establish aRomania-Moldova Enterprise Facility that would provide business management advice andassistance in raising financing for small and medium-sized projects in both Romania and Moldova.Since Moldova joined IFC early in 1995, IFC has worked closely with the Bank in its efforts todevelop a successful program. The demand for MIGA guarantees has been limited until now, onlyone preliminary application has been received, but demand is expected to pick up with foreigninvestments in the medium term.
52. Private sector development in the agriculture and agro-business sector is especiallyimportant, as this sector is likely to play a major role in the development of exports. The objectiveof the Bank's three year agricultural investment program is to promote rural land reform and farmrestructuring, improve post-privatization services to agro-enterprises, initiate rural finance reform,and strengthen human resources and institutions in the sector. In this context, the FirstAgricultural Project would concentrate otn supporting agricultural research for key exportcommodities as well as the related research institutions' farmers outreach programs, promotingagro-enterprise restructuring and investment plauling, and assisting the Government in sectoralstrategic plairing. analysis of sector refonns, and the preparation of further public investments forthe sector. The proposed Second Agricultural Project would provide support to the agriculturalservice sector, including commercial seed production; technology transfer for farm equipment andpost-harvest crop-handling, a "Rural Entrepreneurs' Fund" for farm recapitalization post-restructuring: the design and capitalization of a crop insurance system, and export promotion. Theproposed Irrigation Project would rehabilitate and complete selected irrigation schemes to reducethe risk of drought in the southern part of Moldova, and further strengthen the agricultural
- 17 -
research, education and extension system. Support will also be provided for the development of thecadastre system to help develop a market for land.
53. Supporting the development and strengthening of public institutions needed in themanagement of a market economy is an important element of the Bank group's assistancestrategy. The main instrumients for this purpose will be Economic and Sector Work (ESW). andcoordination of institution building technical assistance. The Bank will finance the rehabilitation ofessential infrastructure. and the revamping of public institutions for their new role in a marketeconomy. and for new areas of attention. the most important of whiclh is the environment. Finally.the program will support the Government's efforts to improve financial discipline throughout theeconomv, as the key to accomplishing structural adjustmnent.
54. The central piece of ESW will be the Public Expenditure Review (PER), which iscurrently underway. The main themes of the PEh are (i) macroeconomic sustainabilitvy (ii)structural shifts in expenditures reflecting the changing role of the Govenunent during and after thetransition: and (iii) institutions, criteria and mechan-ismiis for effective expenditure decisions andcost control, including continued work on improving Public Investment Progranrriing. Tocomplement this effort, the Bank will provide targeted technical assistance financed from theInstitutioiial Development Fund (IDF). Examples are the IDF grants for institutional strengtheninigof the Department of Energy, for Accounting Reform, and for Public Procurement legislation.which are under implementation. Further IDF grants will be proposed to help the Governmentdevelop a Real Estate strategy and to support Health Care reform. Finally, Sector Work will helpthe Government redefine its role in specific sectors, and identify priorities for public investments.The Bank recently completed an Agriculture Sector Review, and a Transport Sector Review.Before embarking on the second energy project a fonnal sector review will be undertaken, andwork is planned in the social sectors as well.
55. The Bank will support badly needed capital preservation and investment in the energysector. This would include upgrading of existing facilities to stem the deterioration of these assets:technical assistance for institution building and regulatory' reform; improvement of financialinformation and management systemns for the energy utilities: and investments in metering,techlical control and dispatching of electricity and gas. As it will take some time to improve thefinanlcial situation of the energy enterprises, the Bank will start with a small project to address themost urgenit capital preservation needs, and to build the institutional capacitv for environment andfor energy audits of enterprises, to be followed by a larger project once the financial positioin of theutilities xere improved enough to justify a higher volume of lendilg. It will also finanice publicinvestmiients and support institutionial reforms in the transport sector, based upon the conclusionsof the Transport Sector Reviexv. This xvould be complemenited by investments developing theinstitutional capacity for export promotionl.
56. The National Environmental Action Plan. has identified wvater and soil pollution and theenergy intensitv of the economn as key priorities for action. These will be addressed in the contextof specific projects. Support for integrated pest managemiient in the first agriculture project, andthe support of quality monitorinig of agricultural products. would help monitor and eventuallvaddress the problem of pesticide residues in those products. A water use master plan is beingprepared in the context of the irrigationi project. and eniergy audits of industrial enterprises will bedone in the enlergy and environmient project.
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57. The Bank will work with the Government to improve financial discipline. mainly in thecontext of SAL II and the PER. The energy sector will receive special attention. Lending in thissector will be contingent on improvement of financial discipline, as evidenced by theimplementation of the action plan for the energy utilities agreed betweeni the Government and theBank. The key element of this plan is disconnectioni of services to non-payers. In order tominimize the social impact of higher energy prices, this plan provides for a life-line energy supplyat subsidized prices. Above that, the cross-subsidy from commercial customers to households w-illbe phased out.
58. The Bank will support the Government in putting a meaningful social safety net inplace, maintaining essential social services, and restructuring the education and healthsystems to be sustainable and affordable in the medium term. The structural reform programssupported by the Rehabilitation Loan and the first Structural Adjustment Loan included importantfirst steps toward improved targeting of the social benefits and pension svstem. The programsupported by SAL II will deepen these measures, aiming to put in place the key elements leadingtowards an affordable benefits system. This work will be reinforced by the Poverty Assessment,which will help the Government and the Bank assess the effects of econoiic policies on the mostvulnerable groups.
59. In education, where the Government is more advanced in defining its oxNn strategy, theEducation Project will support curriculum development, teacher retraining, assessment systemdevelopment and procurement of textbooks and teaching materials, all for general education. TheBank's intention is to use the preparation of this first education project to initiate a long-termdialogue, and to reach agreement on a comprehensive sector reform "road map." focusing on amedium term human resource development strategy to support private sector development andexport promotion, and on improvement of financing and resource allocation mechanisms in thesector. This dialogue will also focus on the issue of gender equality, as there is some evidence thatthe economic decline ma' have had a bigger negative impact on girl's enrollment, especially in thecountryside.
60. In the case of health care, as noted above, the Bank will provide technical assistancefinanced from an IDF grant. The overall objective would be to help the Government target itsexpenditures so as to maintain access to critical services and protect the poor. Work in this areamight lead to a small project toward the end of the CAS period.
Portfolio Implementation
61. While the Government's commitment to the transition to a private sector led marketeconomy is solid, it has proved difficult to generate strong ownership of specific projectinterventions. Until very recentlv, the Bank's operations have been emergency or fast-disbursing.They were prepared much more quickly than is possible for an investment project in a newinstitutional environment. The expectations generated by this early experience, together withunfamiliarity with Bank project implementation, meant that the need for active Governmentparticipation, including commitments to maintaining counterpart staff and budget funds. was notinitially internalized. Both sides are now working to correct this. In CAS discussions. theGovernment agreed to set up clearly defined counterpart groups at the working level for eachproject, and to involve the Ministr' of Finance and the Parliament early on to avoid delays in theprocess of budget allocation for Government contributions and ratification of legal documents. In
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addition, the design of Bank projects is being simplified to reflect the limited institutional capacityfor project preparation and implementation. Action to strengthen procurement is taking place withassistance from an IDF grant, and there will be further attention to strengthening procurementfunctions in each forthcoming Bank operation.
Box: The Situation in Transnistria and the Bank's Program
Motivated by notably differing approaches to economic reform, the region on the left bank of the Nistria river, knownas Transnistria, attempted to secede in 1991. A brief anned conflict was followed by a signed cease-fire in July 1992.Since then both parties have tried to find a constitutional solution unider the aegis of the OSCE. The MoldovanGovenunent has offered Transnistria regional autonomy uider a fonnula similar to that agreed with the Turkish-speaking GTagauz region in the south; the authorities in Transniistria support a confederationi of two sovereign states.Developments in Russia appear to influence the tenor of the continuing dialogue.
The region accounlts for about 16 percent of Moldova's territory aid 17 percent of its popuilationi, with a higherpercentage of Russians and Ukrainiians than in the population at large. hi the past, its industrial production accountedfor 28 percent of the total. More significantly, Transnistria produces almost all of Moldova's electricity and all of itssteel aid is an important source of water. Trade routes to Ukraine traverse the region, including the main route to theBlack Sea port of Odessa. Moldova is nearly 100 percent dependent oni imported energy, aLmost all of which comestlhrough Transnistria, including three natural gas pipelines from Gazpromn Russia; petroleum products and coal areimported by rail from Russia and IJkraine.
Since the cease-fire, econiomic cooperation via these trade anid transit routes has continued amid strengtlLened. hi July1995 the two parties signed an agreement to avoid the use of military force, to seek conflict mediation, and to use theMoldovan leu for non-cash tranisactions (there has been some dispute about the continuation of the monetary part ofthe agreemenit), They have also agreed to participate in a joint venture with Gazprom Russia.
World Bank lending to date has been to the Republic of Moldova; however, none has been explicitly targeted to theTranisnistria region, although Transnistria has benefited from a share of the fuel imports puirchased umder theRehabilitation and Structural Adjustment Loanis: A planned Bank mission to assess the economic situation in theregion had to be postponed because of lack of agreement with the authorities there, but cooperation at the technicallevel resulted in successful collection of data.
Future lendinig which explicitly included Transnistria would need to respond to two key factors: (i) the need to moveto a market economy in the region and (ii) its severe econiomic decline amid poverty. Oii both counts, its situationdiffers markedly from that in the rest of Moldova. The different political sensitivities and starting point would raisereal questions about the nature, speed and sequencing of operations that wouid be appropriate there. As triggers fDrlending, a constitutional resolution to the Transnistria status would have to be in place, and the commnitment toundertake econiomic refonns in line with those being undertakien in the rest of Moldova.: Poverty alleviation would bea high priority in Transnistria.
62. The importance of supervision is increasing in the Bank's work program. Mostlending to date in Moldova has been to support the Government's adjustment program.Supervision of this portfolio has been part and parcel of the policy dialogue. While clearly more isneeded to broaden and deepen this adjustment program, the focus of the Bank's efforts is shiftingto investment lending, starting with small loans in key sectors. The wider scope of the lendingprogram and domestic institutions involved requires a quantum change in supervision, withcoefficients that are above the Bank-wide average. The Bank's supervision strategy for Moldovaincludes:
* keeping initial loans small to build understanding and capacity with counterpart agenciesbefore embarking on more ambitious operations,
* carrying out broad capacity building efforts through judicious use of IDFs, for example onpublic procurement, legal, real estate and accounting reforms;
- 20 -
* organizing training in key aspects of project management, including procurement.disbursement and financial management:
* holding weekly meetings between the Bank's Resident Representative and the Deputy PrimeMinister to discuss issues affecting the lending program, including implementation (thepossibility of transferring greater responsibility for supervision to the field will be reviewedafter more experience with a portfolio of 2-3 investment projects), and
* holding regular country team meetings at headquarters, and with Departmental Management,to review progress in the Moldova portfolio, including feedback from supervision missions andthe Resident Representative's weekly meetings with the Deputy Prime Minister.
63. The civil society and the NGO community in Moldova are still weak, given the fledglingdemocratic tradition. However, the process of nation building and the strong democratizationeffort are leading to a flurry of activity in the press, academic community, political parties andgrass roots organizations. The Resident Mission which was established in 1994 is playing animportant role, both in terms of monitoring these developments and making sure that Bankmissions are aware of them, so that they can benefit from interaction with these groups, and in anoutreach and public education program on economic reform. In addition, the Bank is pursuingactive involvement of stakeholders in project preparation. For example, under the First CadastreProject local land committees will play a critical role in preparing land distribution plans for ruralregions.
64. Coordination between donor organizations is good. Regular meetings between the localrepresentatives of donor agencies in Chisinau have proven useful. The Bank's efforts focusedinitially on raising balance of payments support in the Consultative Group process. ConsultativeGroup meetings took place in October 1993 and March 1995, leading to substantial support fromthe donor community, co-financing with Japan. the United States and the Netherlands, and supportfrom the European Union. A Consultative Group meeting to discuss the PER is envisioned for theFall of 1996. While the Bank will continue these efforts, they are not likely to yield a level offinancing that would eliminate the burdensharing problem for preferred creditors.
65. Cooperation with the other IFI's is very active. Close cooperation with the IMF--whichincludes Bank participation in kev IMF missions--continues to be critical, as macroeconomicstabilization will not be sustainable without structural reformn. The structural reform frameworksupporting the EFF has been prepared in parallel with this CAS. With EBRD. frequentconsultation and coordination on the work program has been very important to divide the work andavoid duplication. This has been particularly effective in the energy and financial sectors. Apartfrom these sectors, EBRD's program consists of a major investment in bottling capacity for thewine industry, a road pioject and a potential oil terminal project on the Danube, and possibly anumber of smaller investments in agro-business.
66. The Government's capacity for donor coordination is improving but still quite weak.Technical assistance funded bv UNDP and the Governnent of the Netherlands is expected to helpaddress this problem. As other donors often are willing to provide significant amounts of technicalassistance on a grant basis, the Bank aims to assist the Government in designing projects thatprovide an umbrella for TA activities from different donors. The cooperation with a large numberof donors in the technical assistance for the Enterprise Restructuring Agency in the context of thePrivate Sector Development Project is a case in point. In this manner, crucial institution buildingassistance can be provided at lower cost.
- 21 -
Risks and IDA Eligibility
67 It is likelv that Moldova will continue its good policy performance and will achieverelatively high growth as of 1996- The Bank would then be in the high case, although it isrecognized that the proposed levels of IBRD financing raise some burden-sharing concerns. Thereare two types of risks that may stop this scenario from materializing. The first is that theGovenmieit will fail to implemilent key parts of the reformn program due to political pressures orinstittitional weaknesses and corruption. Growth would not be achieved and the Bank would be inthe low case. If growth remained poor for a sustained period of time. Moldova might, in fact,become IDA eligible. But in that case. poor policv perfornance would likely result in Moldova'sIDA allocation being veryv low. The second risk is that grow-th would be low, despite good policyperformnance. Such a scenario might materialize, for example, if there is a permanent deteriorationin tenns of trade, or if extemal financinig for the program is insufficient, or if access to exportsnarkets is limited. The Bank would still be in the high case and would continue supportingM4oldova, but creditworthiness may; be weak. Hence, it would consider seeking some IDAfinancing as a blend with IBRD.
E. AGENDA FOR BOARD CONSIDERATION
68. Executive Directors mav wish to consider the following questions:
* Do Directors consider the proposed Bank share in total finanicinig under the base caseacceptable?
e Do Directors agree with the steps included in the Agenda for Reform outlined in the CAS andour assessment of their critical role in economic recovery?
Jamnes D. WolfensohnPresident
AttachmentsWaslington. D.C.April 5. 1996
- 22 -
MOLDOVAAttachment Table: Framework for the Country Assistance Strategy
COUNTRY OBJECTIVES MONITORABLE ACTIONS AND BANK SERVICES TASKSPERFORMANCE INDICATORS
Macro-economic stability and growth * Achieve a GDP growth rate of around 5% Adjustment Lending SAL 11 (FY97)per year
* Reduce inflation to single digits Non-lending services Consultative Group (FY97)* Reduce fiscal deficit to around 3 % of GDP Public Expenditure Review (FY96)* Maintain a viable external position and at CEM (FY98)
least a 2 month reserve cover Transnistria Report (FY97)Private Sector Development * Complete enterprise privatization Adjustment lending SAL 11 (FY97)
* Agreement on a land reform program andsatisfactory implementation Investment Lending PSD I (FY96)
* improve PSD environment and maintain Agriculture I (FY96)liberal trade and price regimes Cadastre I (FY97)
* Strengthen banking system and withdraw Agriculture 11 (FY97)Government guarantees on commercial Irrigation (FY98)loans
Non-lending Services Private Sector Assessment (FY97)Agriculture Sector Update (FY97)Financial Sector Note (FY98)
Public Sector Restructuring * Improve financial discipline in energy Adjustment Lending SAL 11 (FY97)sector; including increasing cost recoveryand improving collections Investment Lending Energy (FY96)
* Rationalize public expenditures and develop Energy II (FY98)a Public Investment Program Transport/Export promotion (FY98)
* Hardening of budget constraints for public Agriculture I (FY96)enterprises, including liquidation of Agriculture 11 (FY97)unviable enterprises Irrigation (FY98)
Non-lending Services Public Expenditure Review (FY96)Transport Sector Rcview (FY96)Energy Sector Review (FY97)Municipal Sector Note (FY97)CEM (FY97) rD
NQ)
COUNTRY OBJECTIVES MONITORABLE ACTIONS AND BANK SERVICES TASKSPERFORMANCE INDICATORS
Ensuring Social and Environmental * Improve targeting of social benefits and Adjustment Lending SAL 11 (FY97)Sustainability eliminate arears on benefits payments
* Start reforms in health and education Investment Lending Energy (FY96)* Reduce energy intensity of economy Education (FY97)* Build capacity for environmental Energy 11 (FY98)
managementNon-lending Services National Environmental Action Plan
(FY96)Public Expenditure Review (FY96)Poverty Assessment (FY97)CEM (FY98)
(DN.)
aN.
Annex Al
Page I of 1
Moldova - Selected Indicators ofBank Portfolio Performance and Management
FY93 FY94 FY95 FY96 Planned
Portfolio Performance
Number of projects under implementation 1.00 2.00 3.00 4.00
Average implementation period (years)' 0.31 1.01 0.86 1.10
Percent of problem projects rated U or HLI
(for past years, rated 3 or 4)
Development objectives' S S S
lmplementation progress (or overall S S S
status for past years)d
Canceled during FY in USSm 0.00 0.00 0.00 0.00
Disbursement ratio (%)' N/A 603.41 100.00 N/A
Disbursement lag (%)r -358.29 -0.18 14.01 0.00Memorandum item: % completed projects 0.00 0.00 0.00 0.00
rated unsatisfactory by OED'
Portfolio Management
Supervision resources (total USS thousands) N/A 161.20 188.70 305.80
Average supervision (lJSS thousands/project) N/A 80.60 62.90 61.16
Supervision resources by location (in %)
Percent headquarters N/A 71.81 77.47 67.52
Percent ficid N/A 28.19 22.53 32.48
Supervision resources by rating category
(USS thousands/project)
Projects rated HS or S 0.00 80.60 62.90 37.86
Projects rated U or HIU 0.00 0.00 0.00 0.00
Memorandum item: date of last/next CPPR
a. Average age of projects in the Bank's country portfolio.
b. Rating scale: "HS" denotes "Highly Satisfactory", "S" denotes "Satisfactory". "U" denotes "Unsatisfactory", and "HU"
denotes "Highly Unsatisfactory".c. Extent to which the project will meet its development objectives (see OD 13.05. Annex D2, Preparation of
Implementation Summary /Form 590]).d. Assessment of overall performance ofthe project based on the ratings given to individual aspects of project implementation
(e.g., management, availability of funds, compliance with legal covenants) and to development objectives (see OD 13.05,
Annex D2, Preparation ofhlnplemenriatzon Summary [Forn 590]). The overall status is not given a better rating than thatgiven to project development objectives.
e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year:investment projects only.
f For all projects comprising the Bank's country portfolio, the percentage difference between actual cumulative disbursementsand the cumulative disbursement estimates as given in the "Original SARIPR Forecast" or, ifthe loan amounts have beenmodified, in the "Revised Forecast." The country portfolio disbursement lag is effectively the weighted average of
disbursement lags for projects comprising the Bank's country portfolio, where the weights used are the respective projectshares in the total cumulative disbursement estimates.
g, OED data, available in the statistical appendix to the most recent ARPP reports.
Note:Disbursement data is updated at the end ofthe first week ofthe month.Supervision resources include Salaries, Benefits, and Travel for "'BB" source of funds but excludes FAO staff and PCR task
costs.
Annex A2
Page I of 2
Moldova - Bank Group Fact Sheet FY 1993-1999IBRD/IDA Lending Program, FY 1993-1999
Past Current Planned'Category FY93 FY94 FY95 FY96 FY97 FY98 FY99
Comnmitnenrts (USSmt) 26.0 60.0 90.0 55.0 115.0 120.0 100.0
Sector (%)5
Agriculturc 100.0 0.0 0.0 18.0 48.0 33.3 40.0Education 0.0 0.0 0.0 0.0 9.0 0.0 0.0Social 0.0 0.0 0.0 0.0 0.0 0.0 40.0Energy 0.0 0.0 0.0 18.0 0.0 33.3 0.0Non-sector 0.0 100.0 100.0 0.0 43.0 0.0 0.0Power 0.0 0.0 0.0 0.0 0.0 0.0 0.0Private Sector Development 0.0 0.0 0.0 64.0 0.0 0.0 10.0Transportation 0.0 0.0 0.0 0.0 0.0 33.4 0.0Urban 0.0 0.0 0.0 0.0 0.0 0.0 10.0
TO',r< 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Lending instrument (°)
Adjustment loans' 0 0 100.0 66.7 0.0 55.0 0.0 30.0
Specific investment loans and others 100.0 0.0 33.3 100.0 45.0 100.0 70.0
TCTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Dzbursements kUSSm)
Adjustment loans' 0.0 50.3 39.7 30.0 0.0 0.0 0.0
Specific investmenit loans and othcrs 16.0 9.8 0.0 0.0 0.0 0.0 0.0
Repayments (JSSm)
Intcrest (USSrl 0.0 1.2 5.8 4.6 0.0 0.0 0.0
a. Ranges that reflect the base-case (i.e., most likcly) scenario. For IDA countries, planned comrnitments are not presented by FY but as a.hiee-year-total range; the figures are shown in brackets. A footnote indicates if the pattem of IDA lending has unusual characteristcs
(e.g., hBhig degree of frontloading, backloading or lumpiness). For blend countries, planned IHRD and IDA conmnitments are presentedfor each year as a combined total.
b. Fo. future lending, rounded to nearest 0 or 5%. To convey the thrust of countuy stralegy more clearly, staff may aggregate scctors.c. Structural adjustment loans, sector adjustnient loans, and debt service reduction loan.
Note:Disbunerneen da-a is updated at the end of the first week of the month.
Annex A2
Page 2 of2
Moldova - IFC and MIGA Program, FY93-95Past
Category FY93 FY94 FY95
IFC approvals (US$rm)
Sector (%)
TOTAL 0.0 0.0 0.0
Investment instrument (%)
Loans
Equity
Quasi-equity'
Other
TOTAL 0.0 0.0 0.0
MIGA guarantees (USSm)
MIGA commitments (USSm)
'tncludes quasi-equity types of both loan and equity instruments.
Annex A3
Page I of I
Moldova - Summary of Economic and Sector WorkUS$ thousands
.4ctual to
FY95 FY96 FY97 FY98
Calegoty
Agriculture Sector Review 160.8
Agriculture Sector Update (Regional) 21.0
Land Reform Update Policy Note (Regional) 21.0
Financial Sector Strategy Note 63.5
Financial Sector Technical Assistance 29.0 31.7 31.7
Enterprise Sector Technical Assistance 11.0
Energy Sector Review 22.2 63.5
Transport Sector 123.6 3.3
Nlunicipal Sector Note 38.1
Poverty Assessment 1.4 47.3 126.9
National Environment Action Plan 144.9 5.1
Trade Review 70.9
Public Expenditure Review 152.0 19.0
Private Sector Policy Note 31.7
CEM 190.4
CEM tUJpdate 108.8
Auditing and Accounting Study 46.4 6.0
CAS 44.4
Policy Notes 51.0
Transnistria Study 16.0 142.8
rotal Economic and Sector Work 684.2 365.1 460.8 323.7
Annex A4Page 1 of 2
MoldovaMost Same regionAncone grou Nexi
Lalest singleyear recent Europe Lower- hilgerUnit of et/mate A Central middle- income
Indicator measure 1970-75 198045 1988-93 Asia Income group
Priority Poverty IndicatorsPOVERTYUpper poverty line local curr.Headcount index % of pop. ..
Lower poverty line local curr.. ..Headcount index % of pop.
GNP per capita USS 1,060 2,450 12590 4,350
SHORT TERM INCOME INDICATORSUnskilled urban wages loeal curr. .. ..Unskilled rural wagesRural terms of tradeConsumer price index 1987-100 .
Lower incomeFood'UrbanRural
SOCIAL INDICATORSPublic expenditure on basic social services % of GDP .. 8.0Gross enrollment ratiosPrimary % school age pop. .. .. 94 .. 104 105MaleFemale
MortalityInfant mortality per thou. live births 37.0 28.0 25.0 24.8 39.0 35.8Under 5 mortality .. .. 36.0 36.4 61.5 42.6
ImmunizationMeasles % age group .. .. .. 77.6 82.0DPT 8.. .. .. . 82.2 74.2
Child malnutrition (under-5)Life expectancyTotal years 65 65 67 69 67 69Female advantage 6.9 6.6 8.1 8.8 5.9 5.9
Total fertility rate births per woman 2.6 2.5 2.1 2.1 2.9 2.9Matemal mortality rate per 100,000 live birth .. 64 34
Supplementary Poverty IndicatorsExpenditures on social security % of total gov't exp.Social security coverage V. econ. active pop. . .-.
Access to safe water. total % of pop. .. .. .. .. . S6.7Urban . .. .. .. .. 93.9Rural .. ... - 66.7
Access to health care
Population growth rate GNP per capita growth rate Development diamondb6+ (annual average, percent) (annual average, percent)T4 Life expectancy
4S
2 - 0 _________ _______________ GNP Grossper . primary
0 F - 1 1 | 1 1 {c-5 apita enrollment
02 1Acsst1af ae
1970-75 1980-85 1988-93 1 1970-75 1980-S5 1988-93 Access to safe water
Moldova I Moldova- Lower-middle-income - Lower-middle-income
a. See the technical notes, p.387. b. The development diamond, based on four key indicators, shows the average level of development in the countrycompared with its income group. See the introduction.
Annex A4
Page 2 of 2
MoldovaMost Saine region/lncome grom Ne.x
Latest single year recent P-uropc Lowe7-- Alghe,Unit of astimate A4 Cenral middte- income
Indicator measure 1970-75 1980485 1988-93 Asia Income group
Resources and ExpendituresHUMAN RESOURCESPopulation (nsre'-1993) thousands 3.839 4,214 4.408 494,619 1,096,665 500,507Age deperndency ratio ratio 0.35 0.53 0.56 0.57 0.69 0.62Urban % of pop. 35.8 43.8 .50.1 6.4.8 54.7 71.2Population growth rate annual /. 1.3 1.0 0.4 0.6 1.6 1.7Urban *3.5 2.8 2.0 1.5 2.9 1.8
Labor forcet (IS5-64) thousands .. 2,080 2.052 237,897 459,196 190,136Agriculture % of labor rorce .. 36 37Industry .. 28 27Female... 624319Females per 100 males62 4319
Urban number . ..
Rural
NATURAL RESOURCE-SAzea thou. sq. km 33.70 33.70 33.70 24,320.56 40,682.67 21,848.14Density pop. per sq. kst, 113.92 125.04 130.26 20.20 26.52 22.51Agricultural land % of land are 76.58 78.22 77.65 .. 39.61 41.26Change in agricultural land annual ¼ . 0.35 -0.23 -. 8 -. 300Agricultural land under irrigation 6.8 1.3121 .25 12.66 8.84Forests and woodland thou. sq. km ... . 801.84 5,953.78 8,04.4.95Deforestation (net) annual O/ .
INCOMIEHousehold incomeShare or'top 201% of households % of inc-ome . ..
Share of bottom 40% ofhouseholds . ..
Share of bottom 201/. of households . ..
EXPENDITUREF'ood % of GDP . .
StaplesMeat, rish, milk, chees, eggs
Cereal imports thou, metric tonnes 2. .. 20 34,452 66,281' 48,94-7Food aid in cereals ... 72 4,392 5,477 544Food production per capita 1987~ 100 .. .. 101 102FertlDizer consumption kgtha .. 52.7 41.7 48.0 67.8Share of agriculture in GDP %of GDP .. 29.7 34.6 13.5 15.7 8.0Hlousing %ofGDP ... 4.7 6.0Average household size persons per household .. 3.4Urban
Fixed investment: housing %of GDP .. 4.9" 5.'2Fuel and powtr %ofGDP ... 1.0 1.2Energy consumption per capita kcgof oil equiv. .. 2,130 1,345 2.959 1,595 163Households with electricity163Urban V. of households . ..
RuralTransport and communication ¼ of GDP...Fixed investmnent: transport equipment . ..
Tota road length thou. km 12 18 20JINESTMENT IN HUrMAN CAPITALHealthPopulation pcer physician persons 380 270 253 362 3,277Population per nurse 116 92 91 249Population per hospita bed *91 82 81 136 604 395Oral rehydyration therapy (under-S) % of cases ... .. .51
EducationGross enLrollment ratioSecondary % of school-age pop.... 81 . 53 53Female
Pupil-teacher ratio: primnary pupils per teachser . .. .2
Pupil-teacher ratio: secondawy2P'upils reaching grads 4 % of cohort . ..
Repeater rate: primary % of total enroll . ..
Illitemacy %of pop. (age 15+). .45194
Ftmale % of fem. (age 1 5+) 4... .. 19 17Newspaper circulation per thou, pop. . .. .7 125World bank Intemnational Economics Departmnent, Apn-77 95~~7 2
Annex A5Page 1 of 3
Moldova - Key Economic Indicators
Actual Estimate ProjectedIndicator 1990 1991 1992 1993 1994 1995 1996 1997
National accounts(as % GDP at currentmarket prices)
Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Agriculturea 30.7 34.7 39.1 43.1 45.8 41.9 41.1 39.8
bidustrya 39.4 45.6 41.9 30.8 26.4 21.6 20.8 19.6
Services' .. .. .. 20.0 23.1 29.0 30.6 33.0
Total Consumption 76.6 71.1 .. 136.9 99.0 98.5 96.2 92.7Gross domestic fixed 25.6 31.1 .. 7.6 6.4 5.4 7.6 10.4investment
Government investment .. .. .. 2.3 1.5 2.4 3.9 4.9Private investment .. .. .. 5.3 4.9 3.0 3.7 5.5(includes increase instocks)
Exports (GN.FS)b 48.7 34.1 .. 30.7 32.2 31.3 31.6 31.5Imports (GNFS) 51.0 36.2 .. 44.3 37.6 35.1 35.5 34.5
Gross domestic savings 23.4 28.9 .. -36.9 1.0 1.5 3.8 7.3
Gross national savingsc .. .. .. -35.5 1.3 0.7 2.0 5.1
Mfemorandum itemsGross domestic product 21 14 .. 1490 1920 2146 2298 2499(USS million at currentprices)Gross national product per .. .. 1344.0 1180.0 870.0 870.0 913.5 977.4capita (USS, Atlas method)
Real annual growth rates(%, calculated from 1987prices)Gross domestic product at -1.5% -18.7% -24.8% -8.7% -22.0% 0.0% 5.0% 7.0%market pricesGross Domestic Income .. .. .. .. -22.0% 0.1% 5.1% 7.3%
Real annual per capitagrow,th rates (%, calculatedfrom 1987 prices)
Gross domestic product at -2.2% -18.9% -25.0% -8.2% -21.6% -0.3% 4.7% 6.7%market pricesTotal consumption .. .. . .. -26.8% -0.5% 2.4% 3.0%Private consumption .. .. .. .. -19.1% 0.2% 3.2% 2.8%
(continued)
Annex A5Page 2 of 3
Moldova - Key Economic Indicators
(Continued)
Actual Estimate ProjectedIndicator 1990 1991 1992 1993 1994 1995 1996 1997
Balance of Payments(USSm)
Exports (GNFS)b .. 4646.0 867.8 458.0 618.0 671.2 727.3 787.2Merchandise FOB .. 4646.0 867.8 451.1 617.0 670.0 726.0 785.7
Imports (GNFS)b .. 4643.0 904.7 660.3 722.0 754.1 814.7 862.5Merchandise FOB .. 4643.0 904.7 631.0 672.0 697.7 751.3 793.4
Resource balance .. 3.0 -36.9 -202.3 -104.0 -82.9 -87.4 -75.4Net current transfers .. .. .. 22.0 21.0 20.0 5.0 6.0(including official currenttransfers)
Current account balance .. 3.0 -38.1 -181.6 -98.0 -100.1 -128.9 -131.9(after official capital grants)
Net private foreign direct .. 25.0 17.4 14.0 18.0 63.0 30.0 51.0investmentLong-term loans (net) 0.0 10.0 16.1 86.9 134.0 30.3 147.5 94.9Official 0.0 10.0 30.1 47.1 134.0 30.3 94.2 78.5Private 0.0 0.0 -14.0 39.8 0.0 0.0 53.3 16.3
Other capital (net, including .. 158.0 -9.4 49.7 -23.0 19.8 -111.6 -60.0errors and omissions)
Change in reservesd .. -196.0 14.0 31.0 -31.0 -13.0 63.0 46.0
Memorandum itemsResource balance (% of .. 21.5% .. -13.6% -5.4% -3.9% -3.8% -3.0%GDP at current marketprices)Real anunual growth rates(1987 prices)Merchandise exports .. .. .. .. 36.8% 7.0% 6.5% 7.2%(FOB)Primary .. .. .. .. .. 10.8% 8.0% 8.2%Manufactures .. .. .. .. .. -1.7% 2.8% 2.8%
Merchandise imports .. .. .. .. 6.5% 3.0% 6.8% 5.5%(CIF)
Public finance(as % of GDP at current
market prices)'Current revenues 35.2 26.3 19.8 17.1 17.4 20.6 20.0 21.3Current expenditures 32.4 26.3 43.7 23.2 23.9 23.4 20.2 19.5
(Continued)
Annex A5
Page 3 of 3
Moldova - Key Economic Indicators
(Continued)
Actual Estimate Projected
Indicator IY )O 1991 1992 1993 1994 1995 1996 1997Current account surplus (+) 2.8 0.0 -24.0 -6.1 -6.5 -2.7 -0.2 1.8or deficit (-)Capital expenditure .. .. 3.3 2.3 1.5 2.4 3.9 4.9
Foreign financing . .. .. 2.5 4.9 2.2 2.3 2.2
Monetary indicatorsM2/GDP (at current market .. .. .. 16.4 9.7 12.6 13.9 15.4
prices)Growth of M2 (%) .. .. .. -99.6 115.7 62.0 27 ' 27.6
Private sector credit growth / .. .. .. .. .. -24.9 76.1 44.5
total credit growth (%)
Price indices( 1987 =100)Merchandise export price .. .. .. .. 100.0 101.5 103.2 104.3
indexMerchandise import price .. .. .. .. 100.0 100.8 101.6 101.7indexMerchandise terms of trade .. .. .. .. 100.0 100.7 101.6 102.5
index
Real exchange rate .. .. .. .. ..
(US$/LCU)I
Real interest ratesConsumer price index .. .. 1276.0% 788.5% 329.6% 25.4% 9.8% 7.2%
(% growth rate)GDP deflator 14.8% 136.1% 1073.8% 985.6% 369.0% 24.4% 10.0% 7.5%(% growth rate)
a. If GDP components are estimnated at factor cost, a footnoote indicating this fact should be added.b. "GNFS" denotes "goods and nonfactor services.'c. Includes net unrequited transfers excluding official capital grants.d. Includes use of IMF resources.e. Should indicate the level of the government to which the data refer.f. "LCU" denotes "local currency units." An increase in USS/LCU denotes appreciation.
Annex A6Page 1 of 1
Moldova - Key Exposure Indicators
Actual Estimate ProjectedIndicator 1990 1991 1992 1993 1994 1995 1996 1997
Total debt outstanding and 0.0 10.0 38.5 173.7 493.0 588.3 800.8 940.7
disbursed (TDO) (US$m)'
Net disbursements (USSm)' 0.0 10.0 30.1 134.0 205.0 95.3 210.5 140.9
Total debt service (TDS) 0.0 0.0 5.0 4.2 24.0 94.8 79.0 107.8
(USSm)'
Debt and debt service indicators
(%)TDO/XGSb .. .. 4.4 37.9 79.3 87.4 109.5 118.7
TDO/GDP 0.0 71.8 .. 11.7 25.7 27.4 34.8 37.6
TDS/XGS .. .. 0.6 0.9 3.9 14.1 10.8 13.6
Concessional/TDO .. 0.0 25.7 .. 16.4 16.8 15.2 14.4
IBRD exposure indicators (%)
IBRD DS/public DS .. .. 0.0 24.7 16.7 8.5 13.3 13.4
Preferred creditor DS/public .. .. 0.0 48.5 37.5 60.2 49.1 60.0
DS
IBRD DS/XGS .. .. 0.0 0.2 0.6 1.2 1.4 1.8
Share of MRD portfolio
IFC (USSm)
Loans
Equity and quasi-equity /c
MIGA
MIGA guarantees (USSm)
a. Includes public and publicly guaranteed debt, private nonguaraniteed, use of vMF credits and net short-
term capital.
b. "XGS" denotes exports of goods and services, including workers' remittances.
c. Includes equity and quasi-equity types of both loan anud equity instruments.
Status of Bank Group Operations in MoldovaIBRD Loans and IDA Credits in the Operations Portfolio
Difference Last ARPP
Origind amount in USS mnilion between actual Supervision RatireProject Loan or Fiscal and expected Devclopment Implementation
ID Credit No. Year Borrower Purpose IBRD IDA Cancelladons Undisbursed disbursements' Objectives Progress
Number of Closcd Loans/Credits: 3
Activc Loans
MlD-PA-38641 L38510 1995 REPUBLIC OF lIOLDOVA PRE-EXPORT GUAR. FAC 30.00 30.00 S S
?6D-PA-8561 L39770 1996 REPUBLIC OF MOLDOVA PPIV. SECT. DEV. 1 25.00 25.00
L39771 1996 REPUBLIC OF MOLDOVA PRIV. SECT. DEV. I 10.00 10.00
TOTAL 65.00 0.00 0.00 65.00 0.00
Active Loans Closed Loans Total
Total disbursed (IBPD and IDA) 0.00 145.82 145.82
Of which repaid 0.00 0.00 0.00
Total now held by IBRD and IDA 65.00 145.S2 210.82
Amount sold 0.00 0.00 0.00
Of which repaid 0.00 0.00 0.00
Total undisbursed 65.00 0.00 65.00
a. Actual disbursements to date minus intended disbursements to date as projected at appraisal.b. Following the FY94 Annual Review of Portfolio Performance (ARPP), a letter-based system was introduced (HS=highly satisfactory, S-satisfactoty, U=unstatisfaetory, HU=higJty unsatisfactory); >
see Proposed Improwments in Project and Portfolio Performance RafngMethodology(SecM94-901), August 23, 1994. fi D
Note: x
Disbursemeant data is updated at the end of the fist wseek of the month >O -_4
Moldova - Statement of IFC InvestmentsAs of
(USS millions)
Original Gross Commitments
Fiscal IFC IFC Held by Held by Undisb. incl.
Year Obligor Type oaBusiness Loan Equity Participants Totals IFC Participants Participants
Total gross commitments b/ 0.00 0.00 0.00 0.00
Less cancellations, terminations, repayment & sales 0.00 0.00 0.00 0.00
Total commnitmnents now held c/ 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Pending Commnitsncnts
Total pending conunitments 0.00 0.00 0.00 0.00
Total commitnisents held and pending conumitments 0.00 0.00 0.00 0.00
Total undisbursed commitments 0.00 0.00 0.00 0.00
b/ Gross corumitimients consist of approved and signed projects.
c/ Held conumitments consist ofdisbursed and undisbursed investmnent.
GQ D3
x
0 -
rn.
Moldova - National Accounts
Part A: Current Price Data(In mililons or local currency unita)
Base-case (most likely) projection
Atlas GNP per capita: S 870 ( 1994)
Mlidyear population: 4.353 millions
Aeail EsnEmate Projection1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004
Gross dornesticproduct martketprices 12.7 24.4 215.0 2131.0 77960 96982 11201.4 128845 1447S.7 161874 270002Net indirect taxes .. .. . 131.0 3630 7235 835.4 976.2 1127.8 1297.1 26083GDPatfactorcost . .. .. 20000 74330 8974.7 10366.1 11908.3 133479 14890.4 243920
Agriculture 39 85 84.0 9180 3571 8 4063.0 46058 5126.3 55177 5867.9 76402Industry. ofwhich 5.0 I1.1 90.0 656.0 20592 2094.6 2328.8 2530.3 2671 3 2806.5 3565 8
Mfanufacturing . 75.0 572.0 18945 1927 1 2142.5 2327.8 2457.6 25820 32805S5rvices 426.0 1802.0 2817 1 3431.4 4251.8 51589 62160 13185.9
Resource balance .0.3 -0.5 .. *289.2 -4222 -374.1 -426.2 -388.6 -313.4 -2754 934Exports(GNFS) 6.2 8.3 6549 25091 30337 3545.2 4059.1 45079 50166 83670Imports (GNFS) 6.5 8.8 .. 944.2 2931.3 3408.4 3971.4 4447.7 4821 3 52920 82736
Total expenditure 13.0 249 . 3078.0 82182 10072.9 11627.7 13273.1 147891 16462.9 269068
Consumption expenditures 9.7 17.3 2917.0 77182 9553.9 10776.7 11937.6 129045 139048 21661 9Covernment 22 3.1 .. 558.0 12950 15.47.3 1672.6 1868.1 2088.3 23459 4(l75.9Private 7.5 142 .. 2318.0 64232 80066 9104.1 10069.4 10816.2 11559.0 175860
Gross domestic investrncnt 3.3 7 6 161.0 500 0 519.0 851.0 1335.5 1884.5 2558.0 5245 0Total government investment' .. .. .. 49.0 120 0 230 9 432.8 626.9 700.8 753.2 1049.0Totalprivateinvestment .. .. .. 112.0 380.0 288.0 418.2 708.6 1183.7 18048 41960
Total Lixed investment 2.4 4 3 .. 161.0 500 0 519.0 851.0 1335.5 1884.5 2558.0 5245.0Totalinvestmentinstocks 0.8 3.3 .. 0.0 00 0.0 0.0 0.0 0.0 0.0 00
Domcstic savings 30 7.0 .. -786.0 778 144.3 424.8 946.9 1571 2 2282.6 53384+ Net factor income 0.0 0.0 0.0 -2.9 -60 9 -168.1 -226.6 -322.3 -386.2 -449.8 -697.2+ Net swrent trnsfers .. .. .. 31.5 85.3 90.4 24.4 30.9 37.1 00 00=National savings . .. .. -757.4 102 1 66.6 222.6 6555 1222 1 18328 4641 2
Grossnationalproduct 12.7 244 215.0 2128.1 7735 1 9530.1 10974.9 12562.1 140895 157377 263030Grossnationaldisposabileincome .. .. .. 2159.6 78204 9620.5 10999.2 12593.1 14126.6 15737.7 26303.0
a. GNFS denotes goods nd nonfactor services.b. Gross domestic fLxed capital fonsation only.e. Derived as a residual; includes increase in stocks. 0s d. Total net unrequited transfers excluding ofircial cWpital grants OQ 0
CD(
Moldova - National Accounts (continued)
Part B: Shares of Gross Domestic Product(percentages calculated using current price data)
Base-case (most likely) prqecuton
Actual Estimate Projection
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004
Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Nctindirecttaxes .. . .. 6.1 4.7 7.5 7.5 7.6 7.S 8.0 9.7
Agriculturevalueadded 30.7 34.7 39.1 43.1 45.8 41.9 411 39.8 38.1 36.2 28.3Industryvalueaddedofwhich 39.4 45.6 41.9 30.8 26.4 21.6 20.8 19.6 18.5 17.3 13.2
Manufacuring .. .. 34.9 26.8 24.3 19.9 19.1 18.1 17.0 16.0 12.1Servicesvalueadded .. .. . 20.0 23.1 29.0 30.6 33.0 35.6 38.4 48.8
Resource balarce (X-M) -2.2 -21 .. -13.6 .5.4 -3.9 .3.8 -3.0 -2.2 -1.7 03Expons (GNFS)' 48.7 34.1 .. 30.7 32.2 31.3 31.6 31.5 31.1 31.0 31 0
Imports(GNFS) 51.0 36.2 .. 44.3 37.6 35.1 35.5 34.5 33.3 32.7 30.6
Total expenditure 102.2 102.1 .. 144.4 105.4 103.9 103.8 103.0 102.2 101.7 99.7Govenment consumption 17.7 12.9 .. 26.2 16.6 16.0 14.9 14.5 14.4 14.5 3S 1
Private consumption 58.9 58.1 .. 108.8 82.4 82.6 81.3 78.2 74.7 71.4 6S IGovemment investment .. .. .. 2.3 1 5 2.4 3.9 4.9 4.8 4 7 3.9
Private investment .. .. .. 5.3 4.9 3.0 3.7 5.5 8.2 11 1 15.5
Grossdonresticsavingp 23.4 28.9 .. .36.9 1.0 1.5 3.8 7.3 10.9 14.1 19.8
Gross national savings .. .. .. -35.5 13 0.7 20 5.1 8.4 31.3 17.2
Memorandum ItemsGDP deflator 123.3 291.2 3418.7 35659.3 167250.2 208059.2 228865.2 246030.1 258331.6 275123 1 3349558
Consumerpriceindex .. . .. 1.00 1.00 1.24 1.36 1.46 1.54 1.62 2 12
ToIaiGDP((millioncuffentUSS) 21.5 13.9 .. 1490.2 1920.2 2145.6 2298.0 2498.7 2733.2 2975.8 4335.2
Conversion fator used (LCU/USS) 0.6 1.8 .. 1.4 4.1 4.5 4.9 5.2 5.3 5.4 6.2
Percepitagrossnationa product .. .. 1344.0 1180.0 8700 8700 913.5 977.4 1045.9 1113.8 14557
(Atlas method: in 1987 US$)
L *GNFS' denotes goods and nonfactot services.'
(D
CsO~h
Moldova - National Accounts (continued)
Part C: Constant Price Data(in local currency, constant 1987 prices)
Bas-case (mot ikely) projection
Atual Estima Projecton
1990 1991 1992 1993 1994 1995 1996 1997 l999 1999 2004
GDP atrnketprices 10.3 8.4 6.3 6.0 47 4.7 49 5.2 5.6 59 t.lGDP at fr, cost .. .. .. 5.6 4 3 4.2 4.4 4.7 5.0 5.3 6 7
Agriculture 2.6 1.2 1.4 2.6 2.1 2.2 2.3 24 2.3 26 29hK,uofy.ofwhich 4.9 3.7 2.7 1.S 1.2 1.1 1.2 1.2 1.2 1.3 1.4
MUSu(cOfZis .. .. .. 1.6 1.1 1.1 1 I 1. 1.1 1.2 1.3
Services .. .. .. 1.2 1 0 0.9 1.0 1.1 1.3 1.4 2.4
Resorce balance . .. .. -0. -0.3 40.2 -0.2 -0.2 -0.2 -0 2 0 0Expoun(G?NS) . .. .. 3.8 5 1.6 1 7 3.S 2.0 2.1 3.0
Import(GNFS) .. .. .. 2.6 I 8 1.S 19 2.0 2.1 2.3 2.9
Toul expesditwe .. .. .. 6.8 4 9 4.9 51 5.4 5.8 631 .0
conmpticon . .. .. 6.3 4.6 4.6 4.7 4.9 5.0 5.0 4.2
Government 0.8 0 9 .. 1.6 0.8 0.7 0 7 0.8 0.8 0.8 l.1Privste . . .. 4.8 38 3.9 40 4.1 4.2 42 3.2
Grossdocnestic investment 3.4 2.8 .. 0.5 0.3 0.3 0.4 0.6 0.8 1.1 3.8Totsl eovnentinvestmcnL .. .. 0.1 01 0.1 0.2 0.3 0.3 0.5 07Total private investremt .. .. .. 0.3 0.2 0.1 0.2 0.3 0.5 0.6 3.3
TotalfLxed investncnt 2.9 1.7 .. 0.5 0.3 0.3 04 0.6 0.8 1.1 3.8Toa3 chaes in stocks 0.5 3.1 .. 0.0 0 0 0.0 0.0 0.0 0.0 0.0 0.0
Tcrm.of-trde (TI) effect . . .. 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0
Gsm dowmsit income .. .. .. 6.0 4.7 4.7 4 9 5.3 5.6 5 9 81 Doraest sving (TT adjuted) . . .. .0.4 0.0 0.1 0.2 0.4 0.6 10 3.9
Netfactocincome .. .. .. 0.0 0.0 4.1 0-0.3 -0.1 -0.2 *0.2 -0.2GNPat m iaet pices ., .. .. 6.0 4.6 4.6 4.8 5.1 5.5 5.7 7.9
L 'GNFS' dentes 'goods an nfacor services.'
o -
X-t
Moldova - National Accounts (continued)
Part D: Annual Growth Rate(caIculated rrom data In constant 1987 prices)
Bars-case (most likely) pro/acnon
Aduol Estimate Projection
1990 1991 1992 1993 1994 1995 1996 1997 199S 1999 2004
GDPat marketprices -1.5% -IS.7% -24.1% .5.0%A .220'4 0.0%/. 5.0%. 7.0/. 7.0Y% 5.0% 6.0%Agrieulture .20.4% .29.5% -21.8% 80.3% -17.0% 4.0% 4.0% 5.0'% 4.5% 3.3% 2 3%Indwustry ofwsich 14.9%. .23.0% -28.t% -31.0% -331% .7.0%h 2.0Y 2.5% 2.5% 2.0% 1 %
Manufacturing .. .. .. .. -29.4% -7 01/. 2.0%. 2.5% 2.5% 2.0V% I t%Serviecs .. .. .. .. -17.8% -11.6% 10.2% 14.7% 14.5% 14.5% 8.t2%
Expoiu (GNFS)' .. .. .. .. -183% 7.0%f 6.6% 7.2% 7.6% 6.6% 65%Inmpou (GNFS) .. .. .. .. -33 8% 3.3% 6.71. 5.6% 5.1% 6.7% 4 9Y
Tot lexpenditure .. .. .. .. -276% -1.0Y 5.1% 6.4% 6.1% 5.1% 5.4%Conspnotion .. .. .. .. -27 2% -0.2% 2.7% 3.3% 2.t% -1.2% -1 3%Investrent -10.8% *15.4% .. .. -338% -12.4% 47.0%'. 44.9/ 35.1% 47.0%. 13.9%
Go desicincome .. .. -220. 0.1% 5.1% 7.3%1. 7.05/. 5.6% 59VGrossdomesticsaving .. .. .. .. -112.9. 21.1% 191.3% 114.W. 65.9% 58.5% 15.3%
Per Caiot growvh rates
PercapigsGDP(mp)a -2.2% -18.9%. -25.0% -4.6% -21.6% -0.3% 4.7% 6.7% 6.7% 4.7% 5.NPer capita GNP (mp) .. .. .. .. -22.2% -1.3% 4.4% 6.1% 6.5% 4.5% 5.8%Per capita total constmption .. .. .. .. .26.8% *0.5% 24A% 3. 0% 2.5% -1.5% -1.6%Percapita pnivateconsumption .. .. .. .. .19.1% 0.2% 3.2'f 2.S% 1.S% -1.4% -3.8%
. *GNFS- denotes 'goods and nonfactor services.'b. *mp denotes'matketprices'
Part E: Period Average Indicators
Adual Esimate Psojedsion1984-t9 19S9-94 1994-99
Marginal national saving rate .. .. 74.2%
Inerantal capital-oiput rtio 10.9 *11.1I
fnWCt elasticity .. .. 1.1
x
0-i0-
Moldova - Exports and Imports
Base-case (most likely) projection
Acwgal Estiimate Projcdio,w19.90 1991 1992 1993 1994 1995 1996 1997 1991 1999 2004
A. Value in current pnices (US$ millions)
Total mnerchsandise exponu (FOB) .. 4646.0 867.8 451.1 617.0 670 0 126.0 785.7 849.5 920.3 1340.3Principal piimuzy products 0.0 0.0 0.0 0.0 213.1 318.4 349.4 381 7 419.6 462.0 707 5Commodity I ...... 175.3 197.1 216.3 236.4 260.2 216.4 43199Cormmodity 2 ...... 49.1 55.2 60.6 66.2 72.9 80.2 122.9Conundiy 3 ...... 36.2 40.7 44.7 41.8 53.5 58.9 89.8Commodity 4 ...... 22.5 25.3 27.8 30.2 33.1 36.5 55.8Musufactued gODds . .. . 188.9 188 5 197.0 204.5 210.3 217.7 263.9Other goods ... .. 45.0 163.1 179.6 199.6 219.6 240.7 36819
Totalmuland-iseimpo-s(CIF) .. 4643.0 904.7 631.0 672.0 697.7 751.3 793.4 838.8 897.7 1214 3Food ...... 140.2 156.0 170.0 176.9 MA2. 192.2 274.8Otherco,wman groods ...... 68.7 76.4 83.3 86.6 89.5 94.1 134 6PCI.NW Wmido comp'. .. 242.0 237.0 274 1 277.7 278.6 286.9 297.9 357.5Inzcmscdiaacgaodanc.i. .. .. .. .. ~~~~ ~ ~~~~~~97.1 107.4 113.9 118.5 122.4 130.1 18s55PrinsaY gods. ..... 45.0 so. 1 51.5 53.6 55.3 58.2 83.2Mamsfactxed goods ...... 52.1 57.3 62.4 64.9 67.1 71.9 107.3Capital gods.. ..... 79.0 83.8 106.4 132.8 157.3 183.5 261.9
B. Vajue in consll 1987 prices (USS maillioin)
Total nwmdimsdi expmgu (FOB) ... . 451.1 617.0 660.1 703.3 753.6 810.7 863.3 1217 3Commodity I ...... 175.3 194.2 209.8 227.0 248.5 270.9 3900Corismodity 2 .-... 49.1 54.4 58.8 63.6 69.6 75.9 109.2ConunodityS 3. . .. 36.2 40.1 43.3 46.9 51.1 55.7 798Conmw&dtyd 4. . .. 22.5 24.9 26.9 29.0 31.6 34.5 49.5Mu,difuawed goods . .... 188.9 1315.11 191.0 196.3 200.9 205.9 234.5Ollwespl .. . . 145.0 160.7 173.5 190.9 209.0 221.0 354.2
Towa nirdandmis imports (CIE) ... . 631.0 672.0 692.0 739.4 780 1 820.7 362.6 1052.1Food . .... 140.2 149.2 157.8 161.0 165.8 171.6 223.0OLha conumaer goods ...... 330.7 332.2 329.3 341.7 351.0 359.1 398.4POL mdothier car . .V.. 97.1 102.6 105.7 107.8 111.1 116.1 150 6Inieimediatagoods nc.i. ...... 45.0 47.9 47.8 48.7 50.2 52.0 67.5Primasy goods . .... 52.1 54.8 57.9 59.1 60.9 64.2 83.0Mmiufacured goods ...... 287.0 287.0 29989 311.6 320.0 327.0 356.7Capita goods ... 79.0 80.2 9131 120.8 142.7 163.1 212.5
a. ndudus pnmny iWducts not pecificAlly Waesaifie4b. IP0L. deiok 'crudc oil mid deiaies.'c L.' dme.4ctes 'nat glsewiucre included.'
Os I
001:
Moldova - Exports and Imports (continued)
19 1 32 1353 S .1 195 39 I"? 1906 3999
E1,m3w Imuv,u~iie .. .. .. .. 36tO518% 6h5% 7.2% 76% 6.S% 65%hym8_Iins g.mda tat .. .. .. . 6.5% 3.0% 6.% 55% 5.2% 5.1% 3.3%
C. uicmhImm(IN7 3 00)
Ma _ .. a ..o" 100.0 100.0 103.5 103.2 104.3 104.8 106.5 1101M_ dm imp" -3I0Q0 00.0 100.8 301.6 1017 102.2 104.1 335.4
dinWm da .. .. .. 100.0 100.0 1007 101.6 102.5 102.5 IO2.4 ff4
DL No.4?clu 3w*u (19873100)
pr F 5l3-d mez .. .. .. .. 100.0 111.0 119.9 1343 IS0.4 161.4 2539Epwud 5-pin .. _ .. .. 100.0 106-9 309.0 309.0 109.6 110.1 121.8
mposd 5s- w .. .. .. .. 300.0 107.7 32z2 1200 123.6 127.9 1765iFmps( -pisd .. .. .. Wm300.0 304.6 113.0 115.2 115.6 117.4 129.2
OQ >
CD M
0
Moldova - Balance of Payments(USS millions at current prices)
Daz-4we (nout likely) pojectfon
Adual Esumage Proj dion1990 1991 1992 1993 1994 1995 I996 1997 1993 1999 2004
Tot expou ofGNFS' . 4646.0 867.8 453.0 611.0 671.2 7273 787.2 851 1 922.2 1343.4Metchundise(FOB) .. 4646.0 367.8 451.1 617.0 670.0 726.0 7857 3495 920.3 1340.3Nonmfetrsevices .. 0.0 0.0 6.9 1.0 1.2 1.3 15 16 1.9 32
Total Ipnu of GNFS .. 4643.0 904.7 660.3 722.0 754.1 814.7 362.5 910.3 972.8 132t4Meandise (FOB) .. 4643.0 904.7 631.0 672.0 697.7 751.3 793.4 8336 397.7 12143Nonfarscrvices .. 0.0 0.0 29.3 50.0 56.4 634 692 715 75.1 114.1
Raouce biSee .. 3.0 -36.9 -202.3 104.0 -32.9 -87.4 -754 -59.2 -50.6 15.0
Netfactorinomne .. 0.0 -20 -1.3 -15.0 -37.2 -46.5 -62.5 *72.9 .82.7 -111.9Factor receipts .. 0.0 0.0 0.7 4.0 1.S 3.9 5.1 5.7 6.4 S1Faetor paynents .. 0.0 2.0 2.0 19.0 39.0 50.3 67.6 736 39.1 120.0
Interest (scheduled) 0.0 0.0 0.0 4.2 19.0 31.t 400 55.8 64.2 72.1 87.1Total interest paid 00 0.0 0.0 3.3 19.0 31.8 400 55.8 64.2 72.1 871Net adjustmnuts to scheduled interas 0.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Oher fctor pamcnts .. 0.0 2.0 -2.2 0.0 7.2 10 4 11.9 14.4 17.0 33.0
Net private curent trwansfers . .. .. 22 0 .3.0 0.0 00 00 0.0 0.0 00Cutmntreeipts.ofwhich .. .. .. 22.0 .3.0 0.0 0.0 0.0 0.0 0.0 00
Workea remittances .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Currcnt paynents .. .. .. 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0
Net official irrct trafets .. .. .. 0.0 24.0 20.0 5.0 60 7.0 0.0 0.0
COrent ac t balnec .. 3.0 -33.9 -181.6 -9t.0 -100.1 -121.9 .1319 -125.1 -133.3 .96.9
official capitl vain .. 0.0 0.t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Private inveIment (net) .. .. 17.4 .. 18.0 63.0 30.0 510 64.0 *0.0 125.0Dictfareitminvestrnent .. 25.0 17.4 14.0 1.0 63.0 30.0 51.0 64.0 80.0 125.0Portfolio investments .. ,, 0.0 .. 0.0 0.0 0.0 00 0.0 0.0 0.0
Net LI bonvwirg 0.0 10.0 16.1 36.9 134.0 30.3 147.5 94.9 115.1 112.4 6.2Disbwscrents5 0.0 10.0 35.1 47.1 139.0 93.3 178.5 124.9 126.6 141.5 122.0Repaymtt(scheduled) 0.0 0.0 5.0 .. 5.0 63.0 31.0 30.0 11.5 29.1 115.3
Totsprincipairpide 0.0 0.0 5.0 .. 5.0 63.0 310 300 11.5 29.1 1153Net adjustme to scheduled repayrnent 0.0 0.0 0.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net onwrLT inflows 0.0 0.0 -14.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0(eontinued)
. Goods and radtor services.b. Histocal data n Debt Repoting System (DRS) other dua projected by country operatin division staffc. 'Lr denotes 'long-tefm'
oo m
x
O LoIsh
Moldova - Balance of Payments (continued)(USS mi. at curremnt prim)
Ba- . fn lkeY) pmJee
Acjal EAiAmale Poato19"0 1991 1992 1993 1994 1"5 1"6 1997 1"9 1999 2004
Avoj ednis to adduled debt service 0.0 0.0 0.0 3.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0Debt ervice hot paid 0.0 0.0 0.0 5.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0Reduction in sleaslprepaynens (-) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0
OhreCapital low .. 16t.0 .9.9 49.7 -23.0 19.1 -111.6 -60.0 .50.0 0.0 00wetsboeternsapit 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0 0.0 0.0 00Nlet cpiaflowsne.i.0 0.0 0.0 0.0 .. 0.0 37.1 -111.6 460.0 -50.0 0.0 00Enmsd anassiom .. 162.0 .9.9 ,, .23.0 -138.0 0.0 0.0 0.0 0.0 00
CieinnetaintemantdFlrcrves .. -196.0 14.0 31.0 .31.0 .13.0 630 46.0 4.0 .39.1 .34.3(- indcates incre in ascts)
Manorundutn IeomsToal rreaveso7widch .. .. 2.5 77.0 179.0 257.0 2570 257.0 257.0 257.0 270.0
Tol resrves mim gold .. .. 2.5 77.0 179.0 257.0 2570 257.0 257.0 257.0 270.0Gold(at yea-endLondonprie) .. .. .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Toual oossresevea(inmonths'impouG&S'O .. . 0.0 1.4 2.9 3.9 3.6 3.3 3.1 29 2.2
Exd.We ratsAhmalaveg(LMAU/USS)
t0.6 1. .. 1.4 4.1 4.5 49 5.2 5.3 5.4 6.2
At endyewr(LCUIUSS) . 0.0 0.4 2.8 5.0 4.7 5.0 5.2 5.4 5.5 6.3lDex real average excange rate (1937 -100) .. .. . 1.0 .. . . ..
CtwrentAceont Bslalnceta%GDP .. 21.6 .. -12.2 -5.1 -4.7 -5.6 -5.3 -4.6 -4.5 -2.2
dc 'e.i.' denotes *not elsewhere included 'e. '3 A S' denotes soods and services.r. LCU dentes 'local cuency units.'S The idex ofthe re exdtep rate reflee USSLOU. so an inrease is an ppcialiomn t the real exdne rate.
O0 0m :>
0 wO W
Moldova - External Debt Stocks and Flows(USS millions at current prices)
Base-case (most likely) projection
AdcIal' Esdmate. Pojedt'on1990 1991 1992 1993 1994 1995 1996 1997 1993 1999 2004
A Cross disbursemcnts
Public&publiclyguuanteed 0.0 10.0 35.1 47.1 139.0 933 11S5 124.9 1266 141.5 1220Official multilateral creditors. of whiC 0.0 00 24.5 28.6 99.0 63.0 64.3 665 658 91.0 740IDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IBRD 0.0 0.0 0.0 28.6 67.0 48.0 383 43.5 50.8 68 0 54 0Official biateral creditors 0.0 10.0 10.6 18.5 40.0 30.3 610 42.0 43.1 29.7 34.4Private creditom. of which 0.0 0.0 00 0.0 0.0 0.0 533 16.3 17.7 20.8 136Bonds 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 00 0.0 00
Privat creditors nonguarantecd 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 00Total LTUloandisbunements 0.0 10.0 35.1 47.1 139.0 93.3 17.5 124.9 126.6 141.5 1220
Net STcredit 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Drawings from IMF 0.0 0.0 0.0 86.9 71.0 65.0 710 68.0 68.0 0.0 00Totldisbunemcnts(LT+ST+IMF) 0.0 10.0 35.1 134.0 210.0 158.3 249.5 192.9 194.6 141.5 122.0
B. AmonizaJionsPublicApubliclyguaranteed 0.0 0.0 5.0 0.0 5.0 63.0 31.0 30.0 11.5 29.1 1158Official multilateral creditots, of whic 0.0 0.0 0.0 0.0 0.0 33.0 00 1.0 4.0 11.5 56.9IDA 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0 11.0IBRD 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 1.0 6.0 30 9Official bilateral creditors 0.0 00 5.0 0.0 5.0 30 0 31 0 29.0 7.5 10.0 379Privatecrcditon..ofwhich 0.0 00 0.0 0.0 0.0 0.0 00 0.0 0.0 7.6 210Bonds 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0 00
Private creditors nonguarantecd 0.0 0.0 0.0 0.0 0.0 00 00 0.0 0.0 0.0 0.0Total LTloanamortiation 0.0 0.0 5.0 0.0 5.0 63.0 31.0 30.0 11.5 291 115 8
Repaymets tolVff 0.0 0.0 0.0 0.0 0.0 0.0 t.0 22.0 7720 59.1 3443Toalamortization(LT+IM) 0.0 0.0 5.0 0.0 5.0 63.0 390 52.0 33.5 88.2 150.1
C. Nct disbursementsPublich publiclygparantecd 0.0 10.0 30.1 47.1 134.0 30.3 1475 94.9 115.1 112.4 62Ofricial multilatral ereditors, ofwhit 0.0 0.0 24.5 28.6 99.0 30.0 64.3 65.3 61.t 79.5 171
IDA 0.0 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0 0.0 -1 10IBRD 0.0 00 0.0 28.6 67.0 48.0 38.3 43.5 49.8 62.0 23.1Official bilaal creditofs 0.0 10.0 5.6 13.5 35.0 0.3 30.0 13.0 35.6 19.7 -3.5Private erdito. ofwhich 0.0 0.0 0.0 0.0 0.0 0.0 53.3 16.3 .17.7 13.2 -7.4Bondi 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0(continued)
a. Historical dat firom Debt Reporttin System (DRS): other data projected by country operations division stai.b. 'LT denates long-cmi ST' denotes ashort-term.'
0Q
x
0 Po-h
Moldova - Euternal Debt Stocks and Flows (continued)(155 ulIu at ewat prke)
Acual. £a64nsuatewj-a199 1991 192 1993 1994 1995 1994 1997 I9t it"9 204
Puivate rediteas nmisiwueed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 0.0 0.0 0.0Total LI' lomnrtdisbursanerts 0.0 10.0 30.1 47.1 134.0 30.3 147.5 94.9 115.1 112.4 6.2
Net ST acdit 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 0.0Net cradit [mm DlF 0.0 0.0 0.0 t6.9 71.0 65.0 63.0 46.0 4.0 .59.1 *34.3Totalnutdisbwsements(LT+ST+IF) 0.0 10.0 30.1 134.0 205.0 95.3 210.5 140.9 111.1 53.3 -21.3
D. Intmst nad daae
Public&publidy uauanteed 00 0.0 0.0 3.2 14.0 20.t 25.0 36.6 42.9 52.2 83.4Officil multiateral creditm, of whic 0.0 0.0 0.0 1.0 4.0 13.1 15.3 22.5 270 32.t 51.7
IDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IBRID 0.0 0.0 0.0 1.0 4.0 *.1 10.5 14.5 19.1 22.7 40.7Official bilatera aeditors 0.0 0.0 0.0 2.2 10.0 7.7 9.2 10.1 10.7 12.9 19.1Pr*vtcaediton,ofwh.ch 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 5.2 6.5 11.8
Bonds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Private editesn rA. artc ed 0 0 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0Totl iArton LTloas 00 0.0 0.0 3.2 14.0 20.1 25.0 36.6 42.9 52.2 t3.4
lue atonSTeredit 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0liiautonIF 'r&awip 0.0 0.0 0.0 3.0 5.0 11.0 15.0 19.2 21 3 19.9 3.7Tol intaest(LT+ST+IMF) 0.0 0.0 0.0 4.2 19.0 31.1 40.0 55.5 64.2 72.2 17.1
E. Extenal debt (DOD)c
PublicApubliclyguarntced 0.0 10.0 33.5 16.1 320.0 350.3 498.3 591.7 708.1 M2.2 1106.5oicia multilateral creditors. of wic 0.0 0.0 22.9 21.6 163.0 193.0 257.3 320.8 384.5 464.0 661.1
WDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IDRD 0.0 0.0 0.0 28.6 99.0 147.0 385.3 223.1 278.5 339.5 533.9
OffiicilbilawalJzeditors 0.0 10.0 15.6 58.2 157.0 157.3 118.3 201.3 237.0 256.7 295.0Private creditor. of which 0.0 0.0 0.0 0.0 0.0 0.0 53.3 69.6 17.3 100.5 150.3
Bonds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Privat creditem noriuarantaed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total LTDOD 0.0 30.0 38.5 16.5 320.0 350.3 498.1 5917 708.8 121.2 1106.5
ST debt 0.0 0.0 0.0 0.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0Use of IM credit 0.0 0.0 0.0 86.9 164.0 229.0 293.0 340.0 348.5 219.4 27.2
Tota DOD(LT+ST+IMP)Fofwhich: 0.0 10.0 38.5 173.1 493.0 531.3 500.1 940.7 1066.3 1119.6 1142.7Principal wears 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Inktret Tears 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(contiued) a. Hiratcical dau frn Debt Repoting Systen (DRS); other data projected by coemty operation division stafr. lq 0b. ILr denotes 'long-tcrtm,' 'ST denoteshrrttmi.M
fDe. 'DOD' denotes *debt osudir nd disbused' x
O .lCh
Moldova - External Debt Stocks and Flows (continued)(USS willions at cunrrent prices)
3e- (t likely) p-oj-cton
Adiel' Eetiimaf4 P roecdion'1990 1991 1992 1993 1994 199S 1996 1997 199S 1999 2004
F. Debt nd debt bwden indicatous(based on da in pauu A-E)
Toel debtavie (USSmiillions) 0.0 0.0 5.0 4.2 24.0 94.8 790 107.8 147.7 160.3 2371Intemst(LT+ST+ )IF? 0.0 0.0 0.0 4.2 19.0 31.8 40.0 55.8 64.2 72.1 t7.1Principal (LT+ INF) 0.0 0.0 5.0 0.0 5.0 63.0 390 52.0 S3.5 8t.2 1501
Total DOD' and TDS'DOD/expoetu(XGS)rstio .. .. 4.4 37.9 79.3 27.4 1095 111.7 124.4 120.6 845DOD/GDPratio 0.0 71.3 .. 31.7 25.7 27.4 34.1 376 39.0 37.6 26.4TDS/expoetu(XGS)ratio .. .. 0.6 0.9 3.9 14.1 10t 13.6 17.2 17.3 17.5
IBRD expo indieatos:3RDDS'I public lonDS .. .. 0.0 24.7 16.7 t.5 13.3 13.4 13.6 17.9 302
Prefcercederitor DS/publicDS .. .. 0.0 48.5 37.5 60.2 491 60.0 t4.2 76.9 61.3IBRDDS/cxpe s(XGS) . .. 0.0 0.2 0.6 1.2 14 3.2 2.4 3.1 5.3CourAsy sltse in IBRD porfolio .. .. .. . .
G. Debt and debt brdan indicatet(bced an post-DDSR daa for countries withprojected debt weksous. based en adjued daafiom Amex C7)
TDS3 ahe DDSR(USS millions) 24.0 94.8 79.0 101.2 147.7 160.3 237 1Interet (LT + ST + iF) 19.0 31.2 40.0 55.1 64.2 7.l 87.1
Principal (LT+3Mf) 5.0 63.0 39.0 52.0 13.5 28.2 1501
Ucr ikmrFactor pay¶net s c/psis (XGS) ratios
Intaepy/me .po .. .. 0.0 0.9 3.1 4.7 5.5 7.0 7.5 7.2 6.4Tol.factorrpayetsIxpois .. .. 0.2 0.4 3.1 5.2 6.9 I.5 9.2 9.6 89
. Hoicl dat fiom Debt Rcput System (DRS) other dat Prjeced by -untry operations divisan staffb. *Lr denotes onogterm,- -Sr dnt asaort-lem.c. *DOD _doe 'debt o andug And disbsed'd .'I- >damote, lotI debt seKrva. XGS d_at 'upona of oods and services'- whiid compri expos of ods. nonfactor senics, factor recipts and works remiUsacesf 'DS' dmots 'debt ace.'
0 Cs
O 4>nwW
Moldova - PubHc Finance(at cument prices and xichange rates)Bae-ease (mm likely) projecion
Acoeal Estimate Projeitien1990 1991 1992 1993 1994 1995 1996 1997 1996 1999
Governent budget (mnillions LCUs) /a
Total lc iit revenues 4.5 6.4 42.5 364.0 1353.0 2001.1 2235.5 2739.9 3136.8 35275Direct txes 1.3 2.2 14.0 146.0 5020 719.2 850.0 1024.1 1161.3 13401IWdirect tax 1.6 3.3 24.0 10.0 478.0 820.5 1003.4 1169.4 1344.9 15399Ondomancigoodsandseivices .. .. .. 161.0 448.0 795.3 9521 110S.1 1273.9 1456.0Onintnantionaltrade .. .. .. 19.0 30.0 25.2 51.3 61.4 71.1 83.0Nonztareocipts 1.6 0.9 4.5 38.0 373.0 462.1 382.1 546.3 630.6 6475(of which current grants)
TotalCurrentExpenditures 4.1 6.4 94.0 494.0 1863.0 2266.9 2261.1 2514.3 2834.6 3205.0Interest on exnal debt .. .. 0.0 4.6 56.8 8.3 27.7 50.7 30.8 120.2Intercst on domestic debt .. .. .. 11.0 107.2 139.1 90.3 93.0 86.5 914Transfer toprivatetdt .. .. .. .192.6 151.0 232.8 145.6 154.6 173.7 2423TrasfarstootherNFPSe .. .. 36.8 26.0 138.0 242.5 156.8 154.6 188.2 161 9Subsidies 1.3 10.0 20.0 115.0 97.0 168.0 193.3 2171 2428Consunption .. .. .. 558.0 1295.0 1547 3 1672.6 1868.1 2083.3 2345 9Wages andsalaries .. .. .. .. 414.4 495.1 501.8 560.4 626.5 6803Otherconswnption .. .. .. .. 80.6 1052.2 1170.8 1307.7 1461.8 1665.6
Budgetay Savings 0.4 0.0 -51.5 .130.0 -5100 -265.1 -25.5 225.5 302.2 3225Capital Revenues .. .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0Tot Capital Expenditures .. .. 7.0 49.0 120.0 230.9 4323 626.9 700.3 7532Capital trawfers . .. .. 0.0 0.0 0 0 0.0 0.0 0.0 0 0Budgetary fixed investment .. .. .. 49.0 1200 230.9 432.8 626.9 700.8 753.2
Overallbalance(--dcficit) .. .. .. *179.0 -630.0 -496.1 -4583 -401.3 -398.6 .4307
Soturces offancuing(+) .. .. .. 179.0 630.0 496.1 452.3 401.3 398.6 430.7Official capital pant .. .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0Net extemai borrowing 0.0 0.0 53.0 385.7 213.9 254.6 281.2 446.8 482.7Net disbursemenu (cash) .. .. .. .. . . ..Adjustments to scheduled principal repayments .. .. .. .. .. ..Adjustments to scheduled debt service (+) .. .. .. .. .. . ..Net monetary rystem .. .. .. 110.0 191.7 69.7 98.4 200.0 140.4 172.9Netotherdornesticborrowing .. .. .. 16.0 52.6 212.5 105.4 .79.9 -18.6 -224.9
(continued)a 'LCIY denotes 'local currency unitb. 'NFPS- denotes 'nonfinancial public sector.
>
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O Un
Moldova - Pubic Finance (continued)(at amya. prIa -A -chow
Bz-ce (-ad hkebf) pv<cHom
1990 195" 1992 1993 1994 19S 1996 1997 199J 1999
Shwn aG DP()
Cmrumreveru 35.2 26.3 19.5 17.1 174 20.6 20.0 21.3 21.7 21.tcm," epawidw 32.4 26.3 43.7 23.2 23.9 23.4 20.2 19.5 196 19.1Dsmba y snvim ILt 0.0 -24.0 46.1 .6.5 -2.7 .0.2 1.8 2.1 2.0
c i mes .. .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0C;alezpWCMibw es .. .. 3.3 2.3 1.5 24 3.9 4.9 4.8 4.7Oa19 Bakme (- - de"^) .. .. -t.4 -S.1 -5. .4.1 -3.1 -21 -2 7
Ohicia l IaPmiW .. .. .. 0.0 00 0.0 0.0 0.0 0.0 0 0NaadmualbonTowi 0.0 0.0 .. 2.5 4.9 2.2 2.3 2.2 3 1 3.0LIbmmyaynzdi . . .. 5.2 2.5 0.7 0.9 1.6 1.0 1.1Olrddm i ig .. .. . 0. 0.7 2.2 0.9 40.6 -1.3 -14
GCovazmig Debt (DOD Ic at dte d ofdte var. in (millions LCUs. wmess noted))
Extaraldt . .. .. 2313 0.0 222.3 499.3 805.3 1230.0 10OSIExtral debt (in USS nilliom) . .. 17400.0 86.1 0.0 47.3 99.6 154.1 238.5 327.2Debttomandiysynm .192.0 7400.0 60748.0 116.7 308.4 373.1 476.5 676.5 t16.9 939.3Oddom dek .. .. .. . 104.6 317.1 422.4 342.6 154.0 -710Totai zdd .. .. .. . 413.0 917.5 1398.2 1824.4 2250.9 27240Totalogwweat sptapucetofGDP .. .. .. .. 5.3 9.5 12.5 14.2 15.5 16.J
Tax dn indicMon t%)
Direaa / GDP 10.3 9.1 6.5 6.9 6.4 7.4 7.6 7.9 t.0 3.3idkeoaacn domsic &3GDP .. .. .. 7.6 5.7 t.2 2.5 t.6 t.8 90IrAikecliandowicG&SIpra ioaqion .. .. .. 6.9 7.0 9.9 10.5 11.0 11.1 12.6Tcxan WaauorWm ae Imerchm imnp . .. .. 2.1 1.1 0.t 1.4 1.5 1.6 1.7
c MDOD denotes 'dbtoiioding al diaersd.-b. 'G&S' demte 'goad ad s 'vms.
OQ
00L?a4O u''Ii
Moldova - Monetary Survey(In millions of local currency unit)
Reas-cat. (most likely) projecthon
Asmaw Estimate Projedbon1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
_. A.tw Flows:
Ne foreiipet .. .. .. -192.9 125.9 58.8 .307.1 -237.2 21 2 321.5Netintemationalrcscscs .. 343.0 .. -44.3 125.9 58.8 -307.1 -237.2 21.2 321.5Otrhrnetforeignpssets .. .. .. .148.6 0.0 0.0 0.0 0.0 0.0 0.0
Domestic credit .. .. .. 401.1 229.7 407.9 643.0 666.7 462.0 576.4Togovernencnt .. .. .. . 191.7 69.7 98.4 200.0 140.4 172.9Government budget . .. .. 110.0 1917 69.7 98.4 200.0 140.4 172.9Other NFPS' .. .. .. 0.0 0.0 0.0 0.0 0 0 0.0Torcstoftheeconcny .. .. .. . 38.0 338.2 544.6 4667 327.6 403.5Private sector .. .. .. . 334.4 .101.5 489.0 296.8 8.5 288.2Other financil institutions -296.3 4397 55.6 169.9 319.1 115.3
Toes dsse, liabilities ... .. .. 208 2 355.6 466.6 335.9 429.5 489.2 897.9Monc-yndquautnoney .. .. .. 266.2 404.0 466.6 335.9 429.5 489.2 8979Net eoLher liabilities . . ., -57 9 48.4 0.0 0.0 0.0 0.0 0.0
B. E-N of Year Stocks:
N-etforeipna.secu 460S.0 5.0 -6917.0 -2259 895.0 901.9 606.9 277.0 45.6 64.0Net inteationsal reservcs .. .. 1951.0 -82.3 75 0 131.5 .180.6 433 S 491.2 .178.8Other net foreip ssets .. .. -8868.0 -143 6 820.0 770.3 787.4 710.8 445.5 242.7
Domestic credit 3941.0 18214.0 103978.0 310.4 537.4 945.3 1588.3 2255.1 2723.1 3299.5Togoveninent (NFPS) .. .. . 308.4 378 1 476.5 676.5 816.9 989.8GovenrnentudWet -192.0 7400.0 60748.0 1167 308.4 378.1 476.5 676.5 8169 989.8Other NFPS .. .. .. 0.0 0.0 0.0 0.0 0.0 0 0Torestoftheeconomy .. . ,. 229.0 567.2 1111.8 1578.5 1906.1 2309.6Privatesector .. ,. .. .. 668.7 567.2 1056.2 1353.0 1361.5 16497Other runcial institutions .. .. .. . -439.7 00 55.6 225.5 544.6 659.9
Totl siset - liabilities 8549.0 18219.0 97061.0 g4.5 1432.4 1847.2 2195.2 2532.1 2677.4 3363.5
Moncy and qu simoL cy 8549.0 18200.0 83085.0 349.2 753.2 1219.8 1555.8 1985.3 2474.5 3372.4Netotberliabilities 0.0 19.0 13976.0 .264.7 679.2 627.4 639.5 546.8 203.0 -8.9(c On ti n ed )* qNFPS denotes nonfenwncial public sector.'
OQ :13
M(D f
o oa
Moldova - Monetary Survey (continued)(in millions of lrcal currency units)
Baros-ears mosl bkeiy) projection
Acuael Esdmate Projection1990 199i 1992 1993 1994 1995 1996 1997 1998 1999
C. Faoa aceoum fr m, tay cx,im (-a % iIQMh)
Net fofigoetuws 53.9 0.0 4.3 -64.7 1.t 73.9 390 14.0 -1.S 1.9COe&ittogovamnt (NFPS) .. .. .. .. 40.9 31.0 30.6 34.1 33.0 29.4Credittorestoftheceoomy .. .. .. . 30.4 46.5 715 79.5 77.0 68 SNet oherliabd1i2i(-) 0.0 0.1 16.8 .75.8 90.2 51.4 411 27.5 1.2 03
TOI_e-oeincUQM 100.0 100.0 100.0 1000 1000 100.0 100.0 100.0 100.0 1000
D. IAcay, cte KiA pi=
MWDP 67415.8 74721.t 38644.2 164 9.7 12.6 13.9 15.4 17.1 202Ah v owhraeMiQM .. 112.9 3S6.5 -99.6 115.7 62.0 27.5 27.6 24.6 363AmuIpwa& teiep e4t .. .. .. , ., -15.2 362 2t.1 0.6 21 2
_mom E epriva credit a % of im in dastic aed .. .. .. .. . 24.9 76.1 44.5 1.t 50.0
IreUt rU ieelKU e*)Nwm _ s6ero ilscur _ rdReal ad-eriod dilsouni rie
b. '~ ,desiates'Itnoneyandquesi ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~ .3
OQ
0
Projected Arars, RescheduUng, and Reductions In Debt and Debt Service(Supplemauby su be use fw smuie r.qdrh debt wwkada)
(OI m DU at met pr4 es)Dau 1-ce M u oI*l) pwc"Ri.
Eemsa FI#eiw
1594 lS9S 1 IS97 1 199 t" 4
A. 2nkrem pe,Th5.
I.lInore dueperDRS'pipelinc 14.0 19.0 190 210 19.0 19.0 I0.02. Ad4u enats to DRS pipdine (ifamy) 0.0 0.0 0.0 0.0 0.0 0.0 0.03. Less h_acs sved through debt reduion 0.0 0.0 0.0 0.0 0.0 0.0 0.04. Ph. ineret anme atuwindDDSRt 0.0 0.0 0 0 0.0 0.0 0.0 0.0S. Plus igeretduemanewLrdebt 0.0 1.1 6.0 15.6 23.9 33.2 73.46. Pis inteest on ST' debt 0.0 0.0 0.0 0.0 0.0 0.0 0.01. Ph Do. vicecIdwsu 5.0 11.0 I5.0 19.2 21.3 19.9 3.7
3. Subtotal nert due (scheduled basis) 19.0 31.3 40.0 55.8 64.2 72.1 87.29. APjisnes to scheduled iWar 0.0 0.0 0.0 0.0 0.0 0.0 0.010. a.Intere not paid 0.0 0.0 0.0 0.0 0.0 0.0 0.0It. Aarem sapAasliass 0.0 0.0 0.0 0.0 0.0 0.0 0.012. Inerest r esdg d 0.0 0.0 0.0 0.0 0.0 0.0 0.013. Interest frgove 0.0 0.0 0.0 0.0 0.0 0.0 0.014. b. Arem reductiotn) A0 0.0 0.0 00 0.0 0.0 0.0I .To-aTWte"rtpaid(Al.A9)(cuh bsis) 19.0 31.8 40.0 55.8 64.2 721 t7.1
B. Dsaueeao
I. Disbmsunes perDJRS pipeline 139.0 46.0 66.0 22.0 13.0 7.0 Q2. Adj unentosnDRlSpipeline(ifmay) 0.0 0.0 0.0 0.0 0.0 0.0 0.03. PlusdiaburmnitconnewLTdebt,ofwiich 0.0 47.3 112.5 102.9 113.6 134.5 122.04. Disbsements fordebtr duction 0.0 0.0 00 0.0 0.0 0.0 0.0S. Subtota LTditsbunemt 139.0 93.3 171.5 124.9 126.6 141.5 122.06. Plus nt ST capital 0.0 0.0 0.0 0.0 0.0 0.0 0.07. PlusI DOpurchas 71.0 65.0 71.0 6.0 61.0 0.0 0.08. Totl disbumemenu 210.0 153.3 249.5 192.9 194.6 141.5 122.0
C Principai repayment
I Principl due per DRS pipeline 5.0 63.0 31.0 30.0 10.0 16.0 29.02. Adjustments to DRS pipcline (if any) 0.0 0.0 0.0 0.0 0.0 0.0 0.03. Less principal saved through debl reduction 0.0 0.0 0.0 0.0 0.0 0.0 0.04 Plu principal on saTes/reshctrucring/DDSR 0.0 0.0 0.0 0.0 0.0 0.0 0.05. Plus principal on newLT debt 0.0 0.0 0.0 0.0 15 13.1 86.t O) Z6. Subtotas LT repayments due (scheduled basis) 5.0 63.0 31.0 30.0 11.5 29.1 115. 3 D X
(tontinued) 0 -.Ja. DRS' denotes 'Debt Reporting Sypiem.'b. 'DDSR denotcs 'debt and debt servie reduction. c. 'L denotes 'long4ernn 'ST denotes 'short.enm'
Projected Arrears, Rescheduling, and Reductions in Debt and Debt Service (continued)(Supplementary annex to be used for euntrles requiring debt workouts)
(USS tillions at current prices)8e4s-ccw (most lttelJ projtedon
Estae Projec on
1994 1995 1996 1997 199B 1999 2004
7. Plus WIF repurras 0.0 0.0 S.0 22.0 72.0 59.1 34.3S. Subtoal repaynents doe (scheduled basis) 5.0 63.0 39.0 52.0 83.5 8.2 150.19. Adjustnent to schd ed prsncipal repayrnents 0.0 0.0 0.0 0.0 0.0 0.0 . 0.0O.a. Principal not paid 0.0 0.0 0.0 0.0 00 0.0 0.0
11 Arraes wcurnulation 0.0 0.0 0.0 0.0 00 0.0 0.012 Principal resceduled 0.0 0.0 0.0 0.0 00 0.0 0.013. Principal faiiven 0.0 0.0 0.0 0.0 0.0 0.0 0014. b. Arrems reduction/prepynerts 0.0 0.0 0.0 0.0 0.0 0.0 00I5.Total principal repayments made (Ct-C9) (cah b 5.0 63.0 39.0 52.0 83 5 38.2 150.1
D. Debt ousnding (end of period)
I. Lorsg4term DODd pe DRS' pipeline, of which 320.0 303.0 339.0 329.0 334.0 325.0 173.02 Existinggprincipal rreas 0.0 00 0.0 00 00 00 0.03. AdjusIrncts to DRS pipeline (if any) 0.0 0.0 0.0 0.0 0.0 0.0 0.04. Less reduction frorn forgiveneWDDSRW 0.0 0.0 0.0 0.0 00 0.0 0.05. Plus onsolidation fimorestructuring/DDSR 0.0 0.0 0.0 0.0 00 0.0 006. Plus new principal arreas (+incrpe/-reductio 0.0 0.0 00 0.0 0.0 0.0 0.07. Plus new LT debt 0.0 47.3 159.3 262.7 374 S 196.2 933.53. Plus ST' debt, of which 9.0 9.0 9.0 9.0 9.0 90 9.09. lnterest rars not yet capitalized 0.0 0.0 0.0 0.0 0.0 0.0 0.010. Plus use of lMF credit 164.0 229.0 293.0 340.0 343.5 289A4 27.211. Exchnge rate impcts on DOD 0.0 0.0 00 00 0.0 0.0 0.012. Tot lDOD. of which 493.0 583.3 300.3 940.7 1066 3 1119.6 1142713. Total rream (interest + principal) 0.0 0.0 00 00 0.0 0.0 0.0
Memorandum item: Adjustment due to debt write-offs 0.0 0.0 00 0.0 0.0 0 0 0.0
a. DRS denotes 'Debt Reporting System -b. DDSR' denotes dcbt nd debt sevice reductica
c. LT denotes 'long-teM' 'sT denotes 'short-tcrm'
d 'DOD' denotes 'debt outstanding and disbursed.' l
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I
IMAGING
Report Nc1: 15499 ML)Type: GAS