Leu (plural: Lei)
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Formerly ruled by Romania, Moldova became part of the Soviet Union at the close of World War II. Although independent from the USSR since 1991, Russian forces have remained on Moldovan territory east of the Nistru
(Dnister) River supporting the Slavic majority population, mostly Ukrainians and Russians, who have proclaimed a
"Transnistria" republic. One of the poorest nations in Europe and plagued by a moribund economy, in 2001 Moldova became the first former Soviet state to elect a communist as its president.
Update No: 263 - (26/11/02)
The international financier, George Soros, has made a startling intervention in the affairs of Moldova, a country where he has spent millions on health and education. Of Hungarian extraction, Soros is well aware of the complex history of Moldova. He is opposing a settlement of the breakaway Transdnestr region through the federalisation of Moldova.
What Soros can see with his finely tuned antennae for Russian encroachment is that a federation of the two halves of Moldova would allow Moscow to continue to make the already largely Russian- and Ukrainian-populated enclave in effect a protectorate, which would be very dangerous for the remainder of the country on the west bank of the Dnestr with its Romanian-speaking population.
Soros advocates an election in Transdnestr under the monitoring of OSCE officials and then a negotiated settlement. The government in Chisinau is likely to be pleased at this intervention since Soros, an American citizen, specifically criticised the US for its role in promoting the plan, which he clearly thinks is an easy way to please the Russians in a part of the world of no great strategic interest to them. Soros is chiding them to do so.
The Moldovans are now in joint military exercises with the US and they are devoted to the campaign against terrorism, knowing enough about the horror and bloodshed it brings from the 1991-92 civil war in Moldova. The US would be unwise to treat them as just a pawn.
The IMF involvement
The Moldovan government, communist since 2001, is fully cooperating with the IMF. President Vladimir Voronin recently had a meeting with the Director of the IMF's Second European Department, John Odling-Smee, who said that he was pleased with the state of Moldova's relations with the IMF. Chisinau is agreeing to comply with IMF recommendations to restructure its foreign debt, much owed to Russia, and to implement other reforms. The IMF is predicting GDP growth of 6% in 2002 and budget, as well as structural, reforms.
Despite its poverty, (it is the poorest country in Europe), it still has a rich soil, is one of the orchards of Europe, and has important wine and tobacco industries. But a great deal more needs to be done.
Most Eurobond holders agree deferred payments
Most holders of Moldavian Eurobonds will agree to a seven-year deferment on payments, Bloomberg reported. Most holders agreed to the government's proposal to defer payments on Eurobonds, which matured in June 2002, to 2009, said a source from Fiduciary Trust International Ltd, who works with emerging market debt. If the debt is restructured, Moldova will pay US$2m annually in interest payments. The government hoped to convince banks and international investors to restructure part of over US$900m in debt at a meeting in London recently.
Moldova issued US$75m in five-year Eurobonds on June 13, 1997. The debt on the bonds subject to restructuring totals US$39.6m. The government was able to buy the rest of the Eurobonds over two years. Moody's, the international rating agency, in July downgraded Moldavia's mid- and long-term ratings three notches to Ca from Caal. Moldavian foreign debt increased to US$1.27bn in January - March 2002, a 2.4% (US$29.48) rise since the beginning of the year. Government debt totals US$956.24m and private debt totals US$315.04m. Debt payment arrears totalled US$6.38m for government and US$19.53m for private debt on March 31st.
Moldovan premier denies plans to renationalise Spanish owned energy companies
Prime Minister Vasile Tarlev said on 13th November that the state does not want to renationalise the three energy distribution networks which are now owned by the Spanish company, Union Fenosa. Vasile Tarlev said that the decision by the Supreme Justice Court [allowing the Prosecutor-General's Office to investigate the terms of the privatisation tender and the contract under which the energy companies were sold to Union Fenosa] was directed against the privatisation department not the Spanish company, ProTV has reported.
Recently, the World Bank country director sent a message to the Chisinau authorities, demanding explanations for the Supreme Justice Court's decision. The message says that if the authorities do not give a satisfactory answer, the bank will regard as impossible the continuation of the implementation of the SAC [Structural Adjustment Credit] III agreement and of the Energy II project.
Tarlev replied: "According to the contract's conditions, this company has fulfilled its commitments so far. The Supreme Justice Court has passed a decision not against the investor, Union Fenosa. This decision recommends that the authorities investigate members of the privatisation commission. This does not mean that it is against Union Fenosa. If this company meets the commitments stipulated in the privatisation contract, then we want it to operate for many years to come to the benefit of the national economy and especially to provide the necessary electricity - of course, it would be desirable at more accessible rates."
Moldova to resume electricity exports to Romania
On 1st December, Moldova will start supplying energy to Romania for US$27.85 per MW. The head of the public relations directorate of the Energy Ministry, Igor Colesnicenco, has told Basapress News Agency, The planned monthly volume is 60m kW.
Romanian company, Electrica, which won the tender organized by the Moldovan Energy Ministry, will import the Moldovan electricity. Moldova's Energoexport company was appointed the Romanian company's import/export partner. The electricity to be exported to Romania will be produced equally by the Chisinau thermal power plant CET-2 and the Cuciurgan power plant.
Commenting on opportunities to export power to other countries in the Balkans, Colesnicenco said the German company, RWE Trading, was selected as the power-supply operator and has signed an agreement with Moldova's state Moldelectrica company. In order to start its operation, the German company has to sign a similar contract with the Cuciurgan power plant.
At the beginning of this year, a joint Moldovan-Russian power generating company, Inter RAO EES-Balkany, was set up. It was registered on 22nd April in Moscow. The Russian RAO EES company holds 76 per cent of the shares, while Moldovan state company, Moldelectrica, and the Cuciurgan power plant evenly share the other 24 per cent.
In the 1990s, the Cuciurgan power plant exported around 50 per cent of the power it produced to Ukraine, Bulgaria and Romania.
IMF forecasts 5% GDP growth in 2003
The International Monetary Fund predicts that Moldova will post five per cent GDP growth and six per cent inflation in 2003, Interfax News Agency quoted the head of the IMF Mission in Moldova, Marta Castello-Branco, as telling a news briefing.
The IMF forecasts GDP growth of six per cent and inflation of just over five per cent in 2002. During talks between the IMF mission and Moldavian government, the government agreed to implement various tasks by mid-December. This includes parliament adopting the 2003 budget in the parameters agreed with the IMF, the approval of a bill on inspections in Moldova of import consignments, and the lifting of restrictions on goods and services exports. If these tasks are implemented by mid-December, the question of further financing for Moldova will be raised at the IMF board session slated for December 25th.
IMF experts say Moldova receives a large share of budget revenue from trade operations, so it is important to have controls over goods imports. The mission noted positive changes in the work of customs services in Moldova, but at present these services cannot guarantee complete accounting and transparency of goods and services imports.
The IMF and the government reached a compromise on the issue of the profit tax rate, which in 2003 will be lowered from 25 per cent in 2002 to 22 per cent, Castello-Branco said.
The IMF board on December 21st, 2000 approved a three-year Poverty Reduction and Growth Facility (PRGF) programme for Moldova totalling US$142m.
Two tranches totalling US$24m were disbursed in September 2000 and February 2001. After the government met various conditions, a third tranche of US$12m was allocated in July 2002. The Moldavian president earlier announced that he hoped the next tranche would be allocated before the end of the year.
FOREIGN ECONOMIC RELATIONS
Moldova hopes to join EU
European integration has the biggest potential to unite and mobilise the Moldavian society, Foreign Minister, Nicolae Dudau, told a conference marking the start of a training programme regarding the mechanism of integration within the European Union. The event is held jointly by the Foreign Ministry, the Institute of Public Policy, the German Foundation, Carl Duisberg, and the German Institute for European policy. "Moldova has been insistently knocking at Europe's door and demands that words about the relations with the EU be replaced by concrete actions as soon as possible," he said.
The minister said a recent initiative from President Vladimir Voronin, sees the creation of an inter-ministerial task force for work on a concept and strategy of entry in the 15-member bloc. Dudau said the Moldavian authorities "ask the EU officials to treat Moldova in the future as a south-eastern European state, without any discrimination, to and include Moldova in the process of stabilisation and association in southeast Europe."
Favourable World Bank conditions
The World Bank's conditions for credit for Moldova are very favourable, BASA News Agency has reported. The money is being lent for 30-40 years, with a 10-year grace period and a symbolic interest rate of 0.75%, Moldavian Deputy Premier, Stefan Odagiu, said at a meeting with World Bank Resident Representative, Carlos Elbrit.
"We intend to negotiate with the World Bank for continued investments for the implementation of successful projects for various domains of the national economy," said Odagiu, who is also the economics minister in the government of Prime Minister, Vasile
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