IMF mulls standby loan for Moldova

WASHINGTON: The International Monetary Fund said Wednesday it planned to provide a standby loan of nearly 600 million dollars to recession-hit Moldova.

The Washington-based institution said in a statement that a recent staff mission to Europe's poorest nation "reached preliminary agreement" on a three-year credit program equivalent to 588 million dollars.

The agreement is subject to approval by the IMF management and executive board, which could consider the program in January 2010, the IMF said.

In the meantime, Moldova could use a 186-million-dollar allocation from the fund to cover its immediate budget financing needs, it said.

"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," the statement said.

Moldova, also facing a political crisis, has been hard hit by the global economic recession.

Weak demand in trading partners has led to a severe downturn in exports and remittances, while foreign direct investment has fallen sharply, the IMF said.

In the first half of 2009, the economy contracted by eight percent, domestic demand declined even faster, and imports fell by 36 percent.

Deflationary pressures have also emerged, with the 12-month inflation registering a negative 2.3 percent in September. Poverty and unemployment levels are rising significantly, the IMF said.

The country of 4.3 million wedged between Romania and Ukraine has few natural resources and is Europe's poorest state measured by per-capita income.