It had been a long time since there had been so much goodwill towards Moldova from its international partners.

Just over a year has passed since former World Bank economist Maia Sandu was installed as President of Moldova after defeating incumbent Igor Dodon in an election last November. .

She has had 12 busy months.

Resolutely pro-European (unlike Dodon, who prefers closer relations with Russia), Sandu’s first task is to rid Moldova of a parliament full of MPs loyal to Dodo and the struggling oligarch Vlad Plahotniuc. currently against extradition to Moldova from the United States. on corruption charges.

Using all the few tools at her disposal, she succeeded: a parliamentary election in July changed the political landscape of Moldova. Many hope the change is permanent.

Sandu’s Action and Solidarity Party – better known by its Romanian acronym of PAS, meaning stage – garnered well over 50 percent of the vote, more than double from the Communists and Socialists, led by two former presidents, Vladimir Voronin and Dodon, who were running on a joint list. Plahotniuc’s Democratic Party, previously the second largest in parliament, has been wiped out entirely.

His next decision was to appoint Natalia Gavrilița, like Harvard graduate Sandu, as prime minister, with the immediate priority of stabilizing a fragile financial vessel and the long-term goal of ridding the country of corruption.

Expectations for both women are high.

“It will be a good year for Moldova, but will require a combination of managing expectations (currently very high for Sandu and his team) and periodic crisis management”, Radu Magdin, strategic communications analyst, consultant and former advisor to Premier Romanian minister. and Moldova, says Emerging europe.

Fortunately, for the first time in several years, Moldova’s main international partners seem to agree.

On January 4, the executive of the European Union, the European Commission, proposed macro-financial assistance (MFA) of up to € 150 million, of which up to € 30 million would be provided in grants and up to 120 million euros in medium-term loans on favorable terms.

Hard times

The new AMF comes shortly after the release of a € 60 million budget support grant in response to an energy crisis and as part of the EU’s economic recovery and resilience plan for Moldova, worth up to € 600 million over the next three years.

Concretely, the AMF would help Moldova to cover part of its external financing needs over the next two years. The operation would thus help to reduce the short-term balance of payments and the budgetary vulnerabilities of the economy.

“The European Commission continues to support the Moldovan people in these particularly difficult times,” said European Economic Commissioner Paolo Gentiloni.

“Along with the new IMF program, this proposed new macro-financial assistance would provide both grants and loans at favorable rates to help support the Moldovan economy over the next two years. As always, this funding would be conditional on the fulfillment of political commitments aimed at solving some of the most pressing problems facing the economic development of Moldova.

Despite now having a parliamentary majority committed to reform, Moldova still faces many challenges, including the continued need to tackle corruption and governance issues that have contributed to a weakening fiscal position. and the balance of payments in recent years.

The last few months have been particularly difficult. Moldova has recently faced a significant energy crisis, which, together with the post-Covid-19 recovery, has other implications for economic stability and future prospects.

In October, the Russian Gazprom raised the price of gas and threatened to cut off the country’s supply. The Financial Times reported that Gazprom was pressuring Moldova to delay energy sector reforms and a free trade agreement with the European Union in exchange for cheaper gas prices, a charge that Gazprom denied.

Even here, Sandu was nimble in securing Moldova’s very first non-Russian gas deliveries from Poland before a new deal with Gazprom was struck in November, with Sandu securing a new gas contract. five years at a lower price than initially expected. requested, as well as a protocol on a future audit of over 700 million euros of disputed Moldovan debt owed to Gazprom.

Commendable progress

The EU’s proposed MFA, which will need to be approved by the European Parliament and the European Council before it can enter into force and make disbursements, would accompany the country’s new IMF program, approved shortly before Christmas and worth US $ 558 million over 40 months, and designed to help Moldova recover from the coronavirus pandemic.

We are far from one of the darkest days in Moldova’s recent history, in July 2018, when the EU froze the first tranche of a previous MFA, worth 100 million euros , claiming that the then country’s government had violated one of its preconditions. : respect democracy and the rule of law.

Despite the progress made since then, which includes the election of a president willing to work with the EU, the authorities in Chișinău still have a lot of work to do.

“The Moldovan authorities have made commendable progress in rehabilitating the banking sector and strengthening macro-financial stability,” said Kenji Okamura, Deputy Managing Director of the IMF.

“However, the Covid-19 pandemic, drought in 2020 and the continued surge in global energy prices have slowed economic activity, intensified downside risks and complicated policymaking. While emergency financial assistance from international partners helped cushion the economic impact of the pandemic, Moldova remains among the poorest countries in Europe, with long-standing governance and structural weaknesses hampering convergence revenues. “

At the end of 2020, Moldova’s current account deficit stood at 6.7%, a year in which the country’s economy contracted by 7%.

According to the European Bank for Reconstruction and Development (EBRD), Moldova’s economy is expected to have grown by 4% in 2022, thanks to growing demand for exports and a revival in household consumption.

Growth is expected to remain above 4% in the medium term.

Fight corruption

In 2014, more than one billion US dollars disappeared from three Moldovan commercial banks (Banca de Economii, Unibank and Banca Socială), causing their collapse and creating a hole representing more than 25% of the total banking assets of the country, or about 12% of GDP.

Last year, the World Bank called corruption in the country “systemic”, while Moldova was ranked 115th out of 180 countries in Transparency International’s 2020 Corruption Perceptions Index.

In its most recent report, GRECO, the Council of Europe’s anti-corruption body, said that Moldova had made “little progress” in implementing reforms aimed at improving corruption prevention .

“The fight against corruption is likely to be strong and a game-changer for the country,” Magdin adds. “But the policy will be virulent, the opposition trying to unite while trying to sow division in the government and parliamentary camp of the PAS.”

In the long run, success in the fight against corruption is likely to be the extent to which Gavrilița’s cabinet and Sandu’s presidency are judged.

The first signs are good: in October Moldova’s Attorney General Alexandru Stoianoglo was suspended and detained for alleged corruption.

“No one in Moldova will stay above the law,” Sandu said.

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