OREANDA-NEWS. October 29, 2009. It will be funded by means of Extended Credit Facility (ECF)/Stand-by Arrangements. This was announced at the joint press conference in Chisinau, by the Prime Minister of Moldova Vladimir Filat and the head of IMF Mission in Moldova Nikolay Gueorguiev.

As the Moldavian prime minister has specified, US295 million will be used to cover the budget deficit and the same amount will be distributed to maintain the currency reserves of the National Bank. The funds to cover the budget deficit will be provided to Moldova for 10 years with 5 year grace period under the interest rate of 0.25% p.a.

The funds to maintain the currency reserves of NBM will be allocated for 5 years with 3 year grace period under 1.3% p. a. As it was noted at the press conference, the agreement with the authorities of Moldova will be submitted for confirmation of the IMF Executive Board which can consider confirmation of the agreement in January 2010. The main objectives of the program are to support macroeconomic stabilization, economic recovery and increased social spending to protect the poor on the basis of a framework of economic and financial policies for 2010-12. Mr. Gueorguiev welcomed the government's commitment to restore fiscal and external sustainability, preserve financial stability, and support investment-led growth.

The program aims to reverse over time the widening fiscal imbalances that emerged in late 2008 and 2009, while increasing budget expenditure for investment and social protection. To facilitate the adjustment, the program provides for adequate budget financing. The mission notes that strong adherence to the agreed policies as well as implementation of reforms to improve the business climate will be crucial to achieving the objectives of the program.

The new program will follow the three-year arrangement under the Poverty Reduction and Growth Facility, which was approved by the IMF Executive Board in May 2006 and expired in May 2009. The Extended Credit Facility (ECF) is a concessional facility and carries an annual interest rate of 0.25 percent, and is repayable over 10 years with a 5.5-year grace period on principal payments.

The framework for the ECF has been approved by the IMF and is expected to become effective soon. The Stand-by Arrangement (SBA) carries an annual interest rate equal to the SDR basic rate of charge, and is repayable over 5 years with a 3.25-year grace period on principal payments.