Delegation of the European Union to the Republic of Moldova

The EU is resuming budget support assistance to the Republic of Moldova

This amount corresponds to budget support disbursements under four programmes: Economic stimulation in rural areas (ESRA), European neighbourhood Programme for Agriculture and Rural Development (ENPARD), Public Finance Policy Reform, and Vocational Education Training. These payments are not related to new Budget Support programmes but are connected to existing programmes that have been ongoing since their signature before 2014.

To allow for this, the Government of the Republic of Moldova has met the conditions and achieved some of the results linked to these four budget support programmes.

These conditions are twofold: (i) General conditions applicable to all budget support programmes – their fulfilment qualifies the beneficiary for budget support disbursement or not and they relate to macro-economic stability-oriented policy, public finance management, budget transparency and sectoral overall policy progress; (ii) Specific conditions – which refer to specific sectoral reforms and their fulfilment determines how much from the eligible amount will be disbursed.

On the General Conditions, the Republic of Moldova has made significant progress in the implementation of stability-oriented macro-economic policy, including measures tackling long-standing vulnerabilities rooted in a non-transparent shareholder structure of the banks and weaknesses in the financial supervisory and regulatory framework. All these progresses paved the way notably for the IMF Board's approval of a new programme with the Republic of Moldova on 7 November 2016.

Secondly, the Republic of Moldova has also made some progress in the way it is managing its public finances and preparing in a more transparent manner its budget. This progress was also important for allowing budget support disbursements.

Finally, the Republic of Moldova has met some of the sector reforms stipulated in the mutually binding budget support Agreements with the EU.

On Specific Conditions, it is to be recalled that the amount to be paid under a budget support programme depends on the level of achievements on the Specific Conditions.

Indeed, the amounts finally disbursed do not correspond to the full amounts requested by the Moldovan authorities. The decision to make partial a payment of € 45,3 million out of € 50 million (eligible) reflects a partial achievement on the Specific Conditions set in the budget support programmes.

While specific conditions are linked to the progress of reforms in the specific sectors targeted by the Budget Support programmes, it is important that broader structural reforms are implemented in order to foster macro-financial stability, budget and public financial management transparency, as well as progress across a wide range of sectoral policies. The European Union remains committed to supporting the Republic of Moldova in its reform efforts, but expects tangible results. The reforms adopted by the Republic of Moldova in recent months should give impetus to continued, reinforced and irreversible reform efforts.

The Public Finance Policy Reform programme contributed to strengthen fiscal governance, initiate a reform of public accounting, enhance debt management and support medium term budgetary planning. Progress was also made in improving the quality of the work of the Court of Accounts as the Supreme Audit Institution.

The achievements in ESRA include notably the construction of 2 business incubators and the creation of almost 200 new businesses, as well as support to national initiatives for youth or PARE 1+1 (programme to stimulate investments from remittances). More than 1100 new jobs were created from the grants schemes such as National Programme for Economic Empowerment of Youth (NPEEY), PARE 1+1, Loan Guarantee Scheme including 350 for women.

The achievements in the Agriculture and Rural Development sector relate to modernisation of livestock farms and food establishments and compliance with EU quality and animal products safety requirements, establishment of new vineyards with high productivity, facilitation of creation and recognition of producers' groups. In 2016, 1142 requests for payment of subsidies for agricultural producers were met.

The EU support includes improved legal, strategic and didactic framework for Vocational Education Training system and network to pave the way to building a modern VET system with up-to-date VET schools and with teachings based more on practice and less on theory to match better the today local Labour market needs.  

 

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