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Moldova
>> Regional Overview >> Moldova Overview
Program Summary
Previous Years' Activities
2001, 2000, 1999, 1998, 1997
Last updated: 04
Introduction
Since the collapse of the 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 for agricultural land privatization and macroeconomic 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.-Moldovan institutional relationships that will help sustain economic growth and democracy.
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 the transition's progress.
Continued political instability has resulted in extensive damage to Moldova's economic recovery. The 1998 parliamentary elections produced an unstable political coalition that hampered the formation of a government in 1999, and political conflicts between the parliament and president slowed the reform program and government operations throughout 2000. A new government is now being formed in the wake of the Communist Party's parliamentary victory in February 2001. Compounding Moldova's problems is the failure to reach agreement on the status of the strategic Transnistria region, the country's most heavily industrialized region. Economic conditions and poverty are now much worse in this enclave 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 despite a return to economic growth, which was an estimated 1 percent in 2000. Moldova's large external debt burden, about a quarter of which is for energy supplies provided by Russia, Romania and Ukraine. At the end of 2000, total public debt was about $1.4 billion, some 76 percent of GDP.
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 repeatedly brought the country to a crisis point, with both Romania and Ukraine temporarily suspending electricity supplies which left most of the country without power for a number of days. Russia has also temporarily cut gas supplies, worsening Moldova's winter heating crisis.
Despite these and other setbacks, Moldova's economic and democratic transition has made important progress; however, the Communist Party's position on continuing reforms and making the transition to a market economy is unclear. 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 completed and two in process. Fiscal reform has also achieved steady progress. The creation of a market-oriented tax system has advanced, with the enactment of major tax laws on 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 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. The February 2001 parliamentary victory by the Communist Party is attributed, in part, to the continuing hardships experienced by most Moldovans in the transition.
Other Donors
The United States is the largest bilateral donor to Moldova. 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 from multilaterals 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.
FY 2002 Program
USAID's program in Moldova contributes to the following Agency objectives: emergence of a competitive, market-oriented economy with sound fiscal policies and good financial management; accelerated development and growth of private enterprises; development of a politically active civil society and accountable local government; use of environmentally sound energy services; and improved humanitarian services to mitigate the adverse impact of the transition to a market-based democracy.
In economic restructuring, as the revised tax code is approved and implemented, USAID assistance will be needed to develop regulations, enhance tax analysis capability, reform and strengthen tax collection and administration, and improve the institutional capacity of parliament to analyze the budget and promulgate economic legislation. With the completion of rural land privatization and titling in 2000, USAID will focus on promoting private systems of agricultural production and marketing, and developing a real property tax law.
To promote enterprise development, trade and investment, USAID will assist in developing a sound legal and regulatory framework, drafting commercial laws, and increasing firm-level investment, competition and productivity. USAID will also promote partnerships between U.S. firms and institutions and Moldovan counterparts in such areas as accounting and agribusiness.
USAID assistance in the energy sector will focus on de-monopolization and privatization, and establishment of a transparent, predictable regulatory regime for the sector.
To strengthen democracy and governance, USAID is placing more emphasis on local government, increasing the involvement of people in political and economic decision making at the local level, and building the capacity of local NGOs and associations to promote reform.
USAID-sponsored humanitarian assistance programs help alleviate the hardships of vulnerable citizens. Examples of this are USAID's 1999-2000 winter heat program for pensioners, schools, hospitals and orphanages and the planned program to improve the targeting of social assistance to the most needy.
In addition to USAID programs, Freedom Support Act (FSA) funds are allocated to a variety of U.S. agencies in support of Moldova's development. These include training and exchanges, as well as technical assistance in law enforcement and commercial law, through State, Commerce and Justice Departments. The Treasury Department also provides advisors in several areas of economic reform.
Activity Data Sheets
- 117-012 Fiscal and Financial Reforms Support Market-led Growth
- 117-013 Private Enterprise Growth Creates Jobs and Generates Income
- 117-023 Local Democratic Institutions Are More Effective, Responsive and Accountable
- 117-034 Social Safety Net Reached Vulnerable Groups
Country Background Information Resources
CIA Factbook
Library of CongressNational Geographic Country Maps
State Dept. Country Information
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Last Updated on: May 29, 2002 |
