Challenge | Approach | Results | Bank Group Contribution | Partners | Moving Forward | Beneficiaries
Moldova is a small, land-locked country with a population of 3.5 million and a GDP of US$ 7.9 billion (2014). The economy is dominated by agriculture and the food industry, but remittances are also central, amounting to around one quarter of GDP during 2011–14. A series of governments over the past decade have promoted European integration, and in 2014 Moldova and the European Union (EU) signed an Association Agreement that also set up a free trade area between them.
Moldova faces persistent challenges in its political and market transition and other important concerns, such as an aging population and a warmer climate. A series of droughts and floods between 2007 and 2015 displaced many people and destroyed social infrastructure, housing, crops, and livestock.
Moldova has established the formal institutions of a market economy, and growth has led to marked reductions in poverty in the past 15 years. Since the 2009 global economic crisis, economic performance has been strong, although the deterioration in external conditions, together with a series of summer droughts and increased governance challenges, particularly in the financial sector, have resulted in slower growth in 2015. Moldova needs to improve its competitiveness and the business environment if progress is to be maintained. Additionally, Moldova’s human potential needs to be maximized by improving the quality of education and health services.
However, the biggest challenge is the need for major improvements in governance. Corruption increased markedly between 2012 and 2014 with Moldova falling from the 30th to the 20th percentile for Control of Corruption according to the Worldwide Governance Indicators (2015), undermining actions intended to increase competitiveness and exemplified, inter alia, by the banking sector crisis in late 2014; political instability increased during the same period, and public trust in government institutions, along with private sector confidence, has eroded. Back to top
The WBG is helping Moldova to address the challenges above and to boost shared prosperity and reduce poverty by capturing the full benefits of EU and global integration. Three strategic areas of engagement are highlighted in the 2014–17 Country Partnership Strategy (CPS): increasing competitiveness; enhancing human capital and minimizing social risks; and promoting a green, clean, and resilient Moldova. Improving governance cuts across all of these areas.
Over the past 10 years, the WBG has provided support through International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD) financing, Trust Funds (TFs), and technical and policy advice. Development policy (general budget support) and investment lending (projects in specific sectors) have been maintained with flexibility, allowing the Bank to shift toward investment lending if conditions require. As of mid-2016, the CPS envisaged total lending of US$ 480 million, of which US$ 75 million is development policy lending. Back to top
Competitiveness
The WBG’s collaborative effort has helped to improve competitiveness:
Agriculture
A range of IDA-funded operations led to a series of important achievements:
Education
In 2010–14, IDA-funded activities were a driving force behind efficiency improvements:
Energy
IDA’s extensive engagement in the energy sector during 2004–12 contributed to:
Social Assistance
In 2009, the IDA-financed Ajutor Social program was introduced, providing social benefit payments to the poorest:
Health
IDA has supported a number of important achievements in the health sector:
Communities
A series of IDA-financed community-focused and emergency response interventions since 2000 have had a significant impact:
Public Services
The IDA-financed governance e-transformation project implemented in 2011–16 has brought innovation:
The International Finance Corporation’s (IFC) committed portfolio in Moldova stands at US$ 56.8 million, consisting of 82 percent loans and 16 percent equity and quasi-equity in a total of 12 projects. IFC technical assistance is supporting agri-business, in particular, improving food safety standards to bring them in line with EU practices, and helping the Government to improve and streamline the regulatory framework for businesses.
The net exposure of the Multilateral Investment Guarantee Agency (MIGA) in Moldova amounts to US$ 17.1 million in projects that support foreign bank subsidiaries in the country, including microfinance organizations and leasing operations. Back to top
Donor partnerships have been effective in leveraging co-financing and speaking as one on key reforms. The WBG convened the multi-donor Briefing Book, the basic document for donor policy dialogue with governments during 2015–16. The Bank leads the transport donor group, is organizing a similar arrangement for the energy sector, informally coordinates health donors, and participates actively in government sector councils. Collaboration with the EU Delegation, Commission, and member states has been essential, particularly in the energy sector and on governance reforms.
WBG operations have also attracted support from other development partners, including the Global Environment Facility, the Governments of the Netherlands, Sweden, Switzerland, and Japan, the United Nations Children’s Fund, and the U.S. Agency for International Development, which co-financed IDA operations, financed carbon operations, and provided other forms of support, including for Advisory Services and Analytics. Four new technical assistance activities to be implemented under the cross-cutting governance theme will be financed from the United Kingdom’s “Good Governance and Investment Climate” TF.
The Bank has provided technical leadership in sectors where it has leveraged resources from other partners. It provided technical assistance on the Land Transport Infrastructure Strategy and a US$16 million IDA credit, after which the European Bank for Reconstruction and Development and the European Investment Bank provided parallel financing of US$ 450 million to the State Roads Administration to improve national roads and manage the road network. Back to top
The WBG has a long-term relationship with Moldova, and although the country continues to face various economic and political uncertainties, the Bank will continue to support reforms when opportunities arise. There is likely to be less emphasis on policy-based lending and more on investment programs with tangible results for the population, and the future program will be anchored in Systematic Country Diagnostic (SCD) priorities, namely, improving economic and service governance and skills.
IFC will continue its support to enhancing competitiveness, particularly in the agriculture sector, including further efforts to ensure food safety and quality, addressing competition issues in selected agri-food markets, and improving trade logistics. Back to top
Reducing weather risks
“We learned our lesson in 2012 when a severe drought ruined the harvest," says Ion Baban, a farmer. "In 2013, though we had more rainy days, our own irrigation system financed by the grant allowed us to see a 40 percent increase in our yield. And it improved both the quantity and already high quality of our grapes. And better quality means better prices.”
Targeting social assistance
“It’s important help for us. The money we receive helps us pay for food and school supplies and buy clothes,” says Sergiu Robu, head of a rural family of 11 children. “My children are growing up; we need more money to buy food, clothes, and to finish the construction of our house.”
Empowering local communities
In Transnistria, 98 percent of Parcani residents voted to put a much-needed roof on the local school. Until two years ago, there was no roof at all. “We couldn't use the third floor or the second floor, really,” says 9th-grader Carolina Gaidari. “It was impossible to concentrate because of the damp and the mold in the classrooms.” Her classmate Dmitrii Nicolaev agrees. “We like it very much now. There is no leaking water and we don't have to work with buckets everywhere.”
