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Moldova
>> Regional Overview >> Moldova Overview
Previous Years' Activities
2002, 2001, 2000, 1999, 1998, 1997
Last updated: 30
(text taken from the FY 2003 Congressional Budget Justification)
THE DEVELOPMENT CHALLENGE: In the mid-1990s, Moldova made considerable progress in democratization and economic development, particularly in reforming the agricultural sector. Since then, development has stagnated partly as a result of a narrow economic base, concentrated ownership of assets, limited foreign and domestic investment, and a legacy of authoritarian leadership and corruption.
The Government of Moldova (GOM), headed by the Communist Party (which won more than a two-thirds majority in February 2001 elections), attempted to improve relations with the International Monetary Fund (IMF) and the World Bank and to comply with agreements negotiated by its predecessor. However, by mid-December 2001 the GOM could not to reach full agreement with the World Bank and IMF. Although discussions with these institutions continue, tranche releases from the international financial institutions will now be delayed for at least several months.
Downward trend of economic growth reversed starting in 2000. According to World Bank statistics, over the last decade Moldova experienced the largest decline in gross domestic product (GDP) of any country in Europe and Central Asia. In 1999, Moldova's annual GDP per capita of $370 was less than a quarter of its 1990 level. However, a reversal of this downward trend started in 2000 and continued in 2001. The budget deficit remained at 1.5% of GDP for those two years. The foreign exchange rate was stabilized, inflation substantially declined and growth in GDP was positive. Moldova's economic decline also accentuated an increase in social and economic inequality.
The decline in output and corresponding income and poverty levels are strongly influenced by poor agricultural performance. Agriculture is the mainstay of the economy, accounting for about 25 % of GDP, 40 % of employment and 65 % of exports (if agribusiness is included). Over the last decade Moldova has experienced significant and continued declines in agricultural production, productivity and exports. However, it appears that economic conditions in Moldova bottomed out in 1999. Agricultural performance led to positive growth in production in 2001. Projections for the coming years give hope that economic growth will continue in the agriculture sector. Agriculture and small and medium-sized enterprise (SME) projects supported by USAID are improving the living standards of people in the agricultural sector.
While it is too early to predict how the government will deal with reform programs over the long term, there are deep concerns regarding private sector agricultural development. To forestall a reversal in the land reform movement, USAID's new strategy will concentrate on farmer assistance and development of SMEs. The Moldova program will strive to create jobs and generate income. Growth will be encouraged through investment in agribusiness and and improving the environment for private enterprise. USAID activities are further discussed in the Program Data Sheets.
Moldova's transformation to a market has imposed significant hardships that have eroded popular support for reform. The percentage of Moldovans living below the absolute poverty line increased from 35 % in 1997 to over 53 % in 1999. While Moldova's transformation to a market economy has proceeded largely on track, it has imposed significant hardships that have eroded popular support for reform. The percentage of Moldovans living below the absolute poverty line increased from 35 % in 1997 to over 53 % in 1999. Moldova's Soviet-era social safety net is ill equipped to handle the numbers of people living in poverty. A necessary step in consolidating economic restructuring activities is by helping Moldova overcome an energy crisis that has resulted in a large external debt to Russia. Since the sale of three of the country's five electric power distribution companies, Moldova's energy-sector reforms have stalled. USAID aims to reduce energy costs by concentrating on energy efficiencies realized through privatization of state-owned utilities, regulatory changes and the introduction of new technology.
THE USAID PROGRAM:
FY 2002 Estimate: $35.42 million FY 2003 Request: $32.5 million The Program Data Sheets provided below cover the four objectives for which USAID is requesting funds. These four objectives concentrate on: fiscal and financial reforms; supporting private enterprise growth to create jobs and generate income; developing effective, responsive and accountable democratic institutions by strengthening local government autonomy and civil society; and helping create a social safety net to reach vulnerable groups.
Starting FY2002 USAID's technical assistance program will move from stabilization to growth. FY 2002 funds will be used to implement the program as currently planned and previously described in the FY 2002 Congressional Budget Justification. USAID also intends to use FY 2002 funds to carry out certain new activities in response to changing circumstances. The specific activities to be funded by FY 2002 and FY 2003 appropriations are described in more detail in the following Program Data Sheets. USAID/ Moldova will use the $24.4 million FY 2003 funds to continue ongoing efforts.
On-going Programs for Which No FY 2002 or FY 2003 Funding is Requested: USAID is not requesting new funds, but is continuing to expend funds already appropriated for the following:
Number: Title: Last
Notified:Planned
Completion:117-0110 Private Sector FY 02 CBJ, p. 554 FY 2002 117-0140 Private Sector FY 02 CBJ, p. 554 FY 2002 117-0210 Citizen Participation FY 02 CBJ, p. 554 FY 2002 117-0150 Energy FY 02 CBJ, p. 554 FY 2002 OTHER PROGRAM ELEMENTS: USAID/Washington manages several activities including a Farmer - to - Farmer Agribusiness Volunteer Program (Citizens Network for Foreign Affairs), a loan portfolio guarantee program, a food industry development program (Louisiana State University), Customs Information, Trade and Transport and energy programs.
The Bureau for Economic Growth, Agriculture, and Trade manages the Loan Portfolio Guarantee (LPG) program, a particular success in Moldova, assists microenterprises and small businesses on the basis of a risk sharing arrangement. This project started in July 2000 with three Moldovan financial institutions. USAID is guaranteeing 50% of the collateral requested by the banks. This three-year, $2.0 million project made 250 loans in the first 15 months for a total equivalent of about $2.5 million in loans to SMEs.
The U.S. Department of Agriculture administers a commodity monetization program that provides agricultural land mortgage loans. Mortgage loans under this program, working through three financial institutions, total about $1million.
OTHER DONORS: Donor coordination is maintained through monthly meetings of all bilateral and multilateral donors at which the U.S. Ambassador and the USAID Country Program Coordinator represent the United States. The U.S. is the only major bilateral donor; however, Germany, the Netherlands, Japan, Great Britain and Sweden all have small bilateral programs. Further, the Soros Foundation and several other private organizations run development programs in Moldova. In addition to U.S. bilateral assistance, the other major players are the multilateral donors composed of the International Monetary Fund (economic policy), World Bank (economic policy, social investment fund, micro-projects at the village level and energy), European Union-Technical Assistance to the Commonwealth of Independent States (agricultural sector) and the International Fund for Agriculture Development (agriculture sector). The United Nations Development Program provides support for a number of separate activities.
Program Data Sheets
- 117-0121 Fiscal and Financial Reforms Support Market-led Growth
- 117-0131 Private Enterprise Growth Creates Jobs and Generates Income
- 117-0230 Local Democratic Institutions More Effective, Responsive and Accountable
- 117-0340 Social Safety Net Reaches 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 |
