CHISINAU, Oct 28 (Reuters) - Moldova, Europe's poorest
country, agreed on Wednesday to a $590 million bail-out
programme from the International Monetary Fund on condition it
kept a tight hand on the budget.
The new pro-Western government, reversing the policy of the
previous communist leadership, accepted the stand-by credit
offer in exchange for a commitment to measures that would ensure
"financial and external stability", the IMF mission chief to
Moldova, Nikolai Georgiev, told a news conference.
These included holding the 2010 budget deficit at 7 percent
of GDP compared with 9 percent this year, said Georgiev who
described talks with the government as "tough but constructive".
A memorandum on the stand-by arrangement would be signed
next January, said Prime Minister Vlad Filat, who appeared
alongside Georgiev at the news conference.
This is the biggest loan the ex-Soviet state of 4.5 million
has received from the IMF and is similar to ones in Ukraine,
Hungary, Romania and Latvia.
Money sent by Moldovans working abroad is vital for growth
but this inflow of funds has dipped with recession gripping
neighbouring countries.
Sandwiched between EU member Romania and Ukraine, Moldova is
locked in a political crisis and had two elections this year.
The last election in July was won by four parties that
formed a coalition on a platform of integration with the
European Union and stepping back from relations with Russia, the
former Soviet master.
A communist leadership under then-President Vladimir
Vorononin earlier this year rejected the IMF's overtures due to
conditions which it saw as too tough.
The European Union has said it will start talks soon on a
new agreement for closer cooperation but that these talks would
depend on Moldova penning a deal with the IMF and enforcing
reforms.
EXCISE DUTY RAISED
Filat said the IMF funds would come in two parts: $295
million would cover the budget deficit and the second $295
million would go to the national bank to replenish reserves.
He denied communist charges that the agreement would lead to
unacceptably tough conditions such as reducing state employees'
salaries, sharply increasing VAT and raising the pension age.
"The opposition has spooked the population and introduced
definite nervousness into talks with the (IMF) mission," Filat
said.
He said the government would raise excise duty on a range of
goods including on petrol and diesel by 7.5 percent, on alcohol
by 4 percent and on luxury car by 20 percent to hold down the
budget deficit.
The IMF has said it expects the economy to shrink by at
least 9 percent this year. But Georgiev said on Wednesday that
the fund foresaw gradual growth in Moldova from 2010 and a full
recovery in 2012.
Despite their victory, the pro-western coalition lacks the
necessary votes to push through its choice for president, who is
elected by parliament, and so the country is still without an
elected head of state.
(Reporting by Alexander Tanas; Writing by Richard Balmforth;
Editing by Andy Bruce)
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