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MOLDOVA
>> Regional Overview >> Moldova Overview
Development Challenge FY2001 Program /
Activity & Budget InformationSummary Tables
Program Summary
Previous Years' Activities
2000, 1999, 1998, 199714
Introduction
Since the collapse of the former Soviet Union, the United States has assisted Moldova in becoming a market-oriented, democratically-governed state as the basis for establishing mutually beneficial political, economic and security relations. Although small compared to other former Soviet republics, Moldova is important to U.S. interests for its potential as a model for its neighbors, given its stability in the face of ethnic conflicts and social hardships, and its exceptional efforts to implement economic reform. USAID’s assistance program furthers broader U.S. goals of stability, democracy and economic prosperity. This is achieved through objectives that: promote economic reform, strengthening institutions and systems to complete Moldova’s transition to a market economy; improve local governance, broadening citizen participation in decision-making, and promote long-term U.S.-Moldavian institutional relationships which will help sustain economic growth and democracy. During FY 2000 to 2001, USAID will prepare a new Country Strategic Plan for Moldova that builds upon past achievements.
The Development Challenge
Moldova has taken significant steps toward building a firm foundation for a market economy. Much remains to be done, however, to complete and consolidate reform, and set the stage for sustainable economic growth. Moldova’s reform program has been notable in a number of areas, but several factors have impeded Moldova’s transition progress.
Continued political instability resulted in extensive damage to Moldova’s economic recovery. The 1998 parliamentary elections produced an unstable political coalition that resulted in the country operating without a government for six weeks in 1999. This situation did not create civil unrest. Ultimately, the mechanisms of a parliamentary democracy worked as evidenced in the formation of a new government. Compounding Moldova’s problems is the failure to reach agreement on the status of the Transdniestr region; the country’s most heavily industrialized region. Although it has the potential to supply all of Moldova’s energy needs, this region’s economic conditions and poverty are much worse than in the rest of the country. Until this dispute is settled, Moldova will not realize its potential as a market-oriented economy.
Prior to the mid-1998 Russian financial crisis, Moldova came close to financial and macroeconomic stabilization. The crisis adversely affected Moldova’s economy, which has yet to recover fully from the effects of that situation due to its continuing economic dependence on Russia.
Energy remains a critical problem due to lack of resources, dependence on fuel imports from Russia, continuing inefficient use of energy supplies, and lack of market mechanisms to establish viable prices. Moldova’s difficulty in paying its major energy suppliers has brought the country to a crisis point. In April 1999, both Romania and Ukraine temporarily suspended electricity supplies, leaving most of the country without power for several days. In the winter of 1999, Russia cut off Moldova’s gas supply temporarily, worsening a winter heating crisis.
Despite these and other setbacks, Moldova’s economic and democratic transition continues to progress steadily. Significant strides have been made in land privatization, and Moldova is noted as a model for its achievements in the break-up of state and collective farms. Energy sector restructuring is progressing, with the privatization of three electricity distribution companies now in process. Fiscal reform has also achieved steady progress. The creation of a market-oriented tax system has advanced, with the enactment of three major tax laws – personal and corporate income taxes and the value-added tax. Budget preparation and execution have been improved, and the treasury system has expanded nationwide with the installation of computer systems.
Democratic reforms have resulted in free and fair presidential and parliamentary elections, an increasingly independent judiciary, and an expanding civil society, including a budding non-governmental organization (NGO) sector with a growing capacity to express itself on policy matters.
External Debt
Moldova’s large external debt burden, about a quarter of which is for energy supplies provided by Russia, Romania and Ukraine, totaled about $1.4 billion at the end of 1998, or about 73% of GDP.
Other Donors
The United States is the largest bilateral donor. Other bilateral donors include Germany, Japan and the Netherlands; working in such areas as export promotion, integrated business service development, support for World Bank loans and a pre-export guaranty facility. Multilateral donors include the World Bank, the International Monetary Fund, the European Union, and United Nations agencies. Assistance provided includes: emergency drought recovery; post-privatization reform; health care and energy restructuring; rural finance; food production, processing and distribution; public administration; enterprise restructuring; human resources development; strengthening judicial and legislative systems and local government; management reform; promotion of foreign investment and trade, crime and drug prevention; and strengthening the role of women in Moldova’s transition.
Country Background Information Resources CIA Factbook
Library of CongressNational Geographic Country Maps
State Dept. Country Information
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Last Updated on: December 12, 2000 |
