IMF approves second loan tranche to Moldova, praises progress

FILE PHOTO: The International Monetary Fund logo is seen during the IMF/World Bank spring meetings in Washington, U.S., April 21, 2017. REUTERS/Yuri Gripas

CHISINAU (Reuters) - The International Monetary Fund said its board has approved the disbursement of a second loan tranche to Moldova worth $21.5 million.

The IMF and the ex-Soviet country agreed in November a three-year loan program worth $178.7 million, after negotiations had earlier been disrupted by a $1 billion corruption scandal that plunged the country into turmoil.

The IMF praised measures taken by the Moldovan authorities since then to stabilize the economy, which is forecast to grow 4.5 percent in 2017.

“The program is broadly on track, enjoys strong country ownership, and is supported by the firm commitment of policymakers to sound economic management,” the IMF said in a statement late on Monday.

“The authorities continue to make significant progress in tackling long-standing vulnerabilities in the financial sector and advancing structural reforms.”

In 2015 Moldova’s negotiations with the IMF and the European Union on funding were disrupted by the disappearance of the equivalent of one eighth of national output from Moldova’s banking system, which triggered an economic and political crisis.

The shock to the banking sector caused the economy to shrink 0.5 percent in 2015, although it returned to growth in 2016, expanding 4.1 percent.

The IMF said the Moldovan government’s priorities for 2017 should include strengthening revenues and implementing structural fiscal reforms.

If Moldova sticks to the IMF program, the loan will continue to be disbursed in tranches based on semi-annual reviews.

Reporting by Alexander Tanas; Writing by Alessandra Prentice; Editing by Susan Fenton