Commission staff working document - Annex to the proposal for a Council Decision providing Community macro-financial assistance to Moldova - Ex ante evaluation statement - Macro-financial Assistance to Moldova{COM(2006) 579 final}
Date: 2006-10-09
Institutions: European Commission
Subjects: EU aid, Moldova, development aid, economic development, economic stabilisation, financial aid, impact study

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 9.10.2006 
SEC(2006) 1258 

COMMISSION STAFF WORKING DOCUMENT 

Annex to the 

Proposal for a 
COUNCIL DECISION 

Providing Community macro-financial assistance to Moldova 

Ex ante evaluation statement 

Macro-financial Assistance to Moldova 

{COM(2006) 579 final} 

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Ex ante evaluation statement 

Macro-financial Assistance to Moldova 

Table of Contents 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

4. 

5. 

6. 

6.1. 

6.2. 

7. 

Problem analysis and needs assessment....................................................................... 3 

Recent economic developments and prospects ............................................................ 3 

PRGF programme ........................................................................................................ 3 

Moldova's financing needs ........................................................................................... 4 

Objectives and Related Indicators of the macro-finantial assistance ........................... 6 

Objectives..................................................................................................................... 6 

Indicators...................................................................................................................... 6 

Alternative delivery mechanisms and risk assessment ................................................ 7 

Delivery mechanisms ................................................................................................... 7 

Risk assessment............................................................................................................ 7 

Added value of Community involvement .................................................................... 8 

Genval criteria .............................................................................................................. 8 

Planning future monitoring and evaluation................................................................ 10 

Monitoring.................................................................................................................. 10 

Evaluation................................................................................................................... 10 

Achieving cost-effectiveness...................................................................................... 11 

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1. 

PROBLEM ANALYSIS AND NEEDS ASSESSMENT 

1.1.  Recent economic developments and prospects 

In the initial phases of transition to market economy, Moldova was considered as one 
of the most advanced reformers in the CIS. However, towards the end of the nineties 
and  in  the  beginning  of  the  current  decade,  the  initial  reform  course  slowed  down 
while  the  government’s  administrative  interference  in  the  economy  increased. 
Moldova's poor performance in the area of structural reforms resulted in a significant 
deterioration  of  the  business  climate  and  led  the  Breton  Woods  Institutions  to 
discontinue their programmes. In the absence of working financing arrangements with 
the  IMF  during  most  of  the  current  decade,  two  EU  MFA  operations  in  favour  of 
Moldova could not be implemented: a medium-term loan of EUR 15 million granted 
in 2000 (Council Decision 2000/452/EC of 10 July 2000) and a grant of an identical 
amount replacing the former (Council Decision 2002/1106/EC of 19 December 2002). 

Between 2001 and 2005, Moldova's economy grew at an average annual growth rate 
of 7%. GDP per capita, thanks also to a substantial real exchange rate appreciation in 
2004,  more  than  doubled  from  its  trough  in  2000  but  still  remained,  at  USD  812 
(estimate for 2005), the lowest in Europe. Moldova is the only country in Europe to be 
classified  as  low-income  by  the  World  Bank.  Growth  has  been  driven  by  domestic 
demand,  primarily  by  private  consumption  and  housing  construction,  boosted  by 
booming  remittances,  that  have  increased  over  time  to  more  than  30%  of  GDP  (in 
2005). 

Structural reforms re-appeared on the Moldova's policy agenda in 2004, notably with 
the  adoption  by  the  government  of  the  Economic  Growth  and  Poverty  Reduction 
Strategy  Paper  (EGPRSP)  in  May  2004,  setting  medium-term  priorities  for 
government action. The government’s commitment to reforms has been reinforced by 
its  European  aspirations,  confirmed  by  the  adoption  in  February  2005  of  the  EU-
Moldova European Neighbourhood Policy (ENP) Action Plan.  

For  most  of  2005,  the  government  pursued  an  economic  programme  intended  to 
demonstrate this renewed stabilisation and reform commitment. Monetary policy had 
to absorb upward pressure on the exchange rate of the leu and on prices generated by 
large  inflows  of  remittances.  In  the  course  of  2005,  inflation  moderated  gradually, 
largely as a result of a sharp increase in the sterilisation efforts by the National Bank 
of  Moldova  (NBM);  the  gradual  easing  of  inflationary  pressures  also  allowed  a 
moderate  depreciation  of  the  exchange  rate.  The  fiscal  policy  remained  prudent  for 
most of the recent period. Already in 2004, due to a strong revenue performance and 
despite fiscal loosening in the run-up to the parliamentary elections in March 2005, the 
budget  surplus  approached  1%  of  GDP.  In  2005,  fiscal  revenue,  primarily  revenue 
from VAT on imported goods, increased further and the general government surplus 
widened to 1.7% of GDP, despite a significant increase in public spending, 

1.2. 

PRGF programme 

Towards the end of 2005, the authorities and the IMF resumed discussions on a new 
IMF-supported  programme  and  in  February  2006  reached  an  agreement  on  a  three-
year financing arrangement under the Poverty Reduction and Growth Facility (PRGF). 
The arrangement was approved by the IMF Board in May 2006. 

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The  PRGF  programme  is  designed  to  maintain  macroeconomic  stability  and  in  this 
way to support growth and poverty reduction, particularly in the context of continued 
strong  inflows  of  remittances  and  substantially  higher  prices  for  imported  energy. 
Under  the  programme,  the  government  is  committed  to  limit  the  budget  deficit  to 
0.5%  of GDP (level of fiscal deficit considered to be appropriate to ensure the right 
balance  between  the  objectives  of  supporting  disinflation  and  meeting  the  country’s 
extensive development and investment needs), and to normalise the financial relations 
with  Paris  Club  creditors.  An  agreement  with  the  Paris  Club  on  restructuring  of 
Moldova's official debt was indeed concluded in May 2006, following the approval of 
the PRGF arrangement. The National Bank is aiming at increasing foreign exchange 
reserves to at least three months of imports by end-2008. The priority structural policy 
measures  include  in  particular  actions  in  the  areas  of  foreign  trade  liberalisation, 
corporate governance, banking sector reform and tax administration. 

By the time of the adoption of the programme, it was assumed that the contemplated 
macroeconomic  and  structural  policies  would  translate  into  still  satisfactory  (albeit 
decelerating) GDP growth, of 6% in 2006 and 5% in 2007-2008, a gradual reduction 
of  inflation  to  about  7%  by  end-2008  and  current  account  deficits  in  the 
neighbourhood of 5% of GDP.  

1.3.  Moldova's financing needs 

Already  in  2005,  Moldova’s  external  accounts  had  shown  a  marked  deterioration. 
While the value of imports increased by nearly 30% in 2005, reflecting the increase of 
import prices (fuel oil import prices had risen by more than 40% in 2005) and volumes 
(to accommodate the rising domestic demand), the growth of exports was much more 
modest. As a result, the trade and current account deficits widened from respectively 
29% and 2% of GDP in 2004 to nearly 41% and more than 8% in 2005.  

Moldova's  external  vulnerability  has  been  further  highlighted  by  the  developments 
since  the  beginning  of  2006:  first,  by  the  doubling  of  the  price  of  the  natural  gas 
imports from Russia (the prices went up from USD 80 per thousand cubic meters at 
the end of 2005 to USD 110 in January 2006 and to USD 160 in July 2006) and by the 
Russian  ban  on  imports  of  Moldovan  wine  introduced  at  the  end  of  March  on 
consumer protection grounds.  

For 2006, the impact on the balance of payments of the increase of the gas prices is 
likely  to  exceed  5%  of  GDP.  The  impact  of  the  wine  ban  may  be  even  larger  given 
that  Moldova’s  exports  of  wine  and  alcohol  in  2005  represented  nearly  30%  of  all 
exports, of which 80% was exported to Russia. It is still not clear how long the wine 
ban may last and to what extent the Moldovan exporters can find alternative markets. 
Moreover,  Moldova's  authorities  fear  that  Russia  may  increase  further  gas  prices  in 
2007-2008, to levels comparable to prices charged to the Western European countries 
(currently, over USD 200 per thousand cubic meters). 

The developments since the beginning of 2006 suggest that prospects for achieving the 
macroeconomic  results  contemplated  in  the  PRGF  programme  are  very  weak.  In 
particular,  it  is  now  projected  that  the  current  account  deficit  will  be  substantially 
larger  and  the  GDP  growth  much  weaker.  Also,  inflation  is  expected  to  be  stronger 
than anticipated. Table 1 summarises the current IMF staff projections of  Moldova's 
main economic indicators. 

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Table 1. Moldova: Main Economic Indicators, 2004-2008

Real sector
   Real GDP growth (% change)
   Inflation CPI (end of period)
   GDP per capita, in USD
Fiscal Sector
   Total revenues, % of GDP
   Total expenditure, % of GDP
   Central govt. balance, % of GDP
External sector
   Current account balance, % of GDP
   Trade balance, % of GDP
   Workers' remittances, % of GDP
   Foreign direct investment flows, % of GDP
External Vulnerability
   External Public & Private Debt, % of GDP
   Debt Service as % of exp. of goods/services
   Import cover (months)

2004

7,4
12,6
721

35,4
34,6
0,8

-2,0
-29,0
25,4
3,7

63,8
21,0
2,1

2005
est.

7,1
10,0
812

39,5
37,9
1,7

-8,3
-40,8
32,0
7,7

54,8
20,3
2,2

2006

2007

2008

          IMF staff projections

3,0
12,0

40,5
41,1
-0,5

-10,5
-53,1
36,8
7,0

52,2
16,7
2,1

3,0
10,0

41,7
42,0
-0,3

-6,8
-58,4
41,0
7,0

56,7
14,4
2,4

5,0
8,0

41,0
41,3
-0,3

-4,3
-57,8
41,8
7,0

55,3
14,1
2,7

In  view  of  these  developments,  achieving  the  government's  objectives  will  require, 
first,  some  adjustment  of  the  PRGF  programme  and,  second,  additional  exceptional 
financing.  Currently  available  financing  comprises  concessional  loans  from  the 
Bretton Woods Institutions, debt relief by official creditors (in the context of the May 
2006  Paris  Club  Agreement)  and  grants  from  bilateral  donors  and  the  European 
Union,  under  the  EU  Food  Security  Programme  (FSP).  Budgetary  support  under  the 
EU FSP for Moldova amounts to EUR 9.2 million, out of which EUR 5.2 million is 
expected  to  be  disbursed  in  2006  and  the  remaining  EUR  4  million  –  in  the  first 
months of 2007.  

Based  on  preliminary  estimates  made  by  IMF  staff,  Moldova's  overall  external 
financing needs in 2006-2008 (period covered by the PRGF programme) are expected 
to exceed USD 370 million. Residual financing needs, i.e. needs calculated taking into 
account  the  identified  financing  sources  (including  the  Paris  Club  rescheduling)  are 
about USD 20 million in 2006 and USD 135 million in 2007-2008 (see Table 2).  

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Table 2. Moldova: External Financing Requirements, 2006-2008

Balance of payments

Current account (excl. Official grants)
Capital and financial account, net (excl. WB PRSC)

Gross reserve accumulation
Accumulation of arrears (2006.Q1-Q2)
Repayment of arrears (2006.Q2)
Total financing needs
Identified financing sources

IMF PRGF
World Bank PRSC
EU FSP
Paris Club rescheduling

Residual financing needs

Source: IMF

in million USD

IMF staff projections

2006
-59,7
-341,3
281,6
-5,0
11,9
-68,1
-120,9
101,0
32,8

6,5
61,7
-19,9

2007
14,6
-264,7
279,3
-154,6

-140,0
61,8
32,8
10,0
5,0
14,0
-78,2

2008
63,8
-200,4
264,2
-175,1

-111,3
55,5
32,8
10,0

12,7
-55,8

2006-8
18,7
-806,4
825,1
-334,7
11,9
-68,1
-372,2
218,3
98,4
20,0
11,5
88,4
-153,9

It  is  in  this  context  that  the  Commission  is  proposing  an  EU  MFA  operation  for 
Moldova intended to contribute to covering the financing needs in 2007 and 2008.  

2. 

OBJECTIVES AND RELATED INDICATORS OF THE MACRO-FINANCIAL ASSISTANCE  

2.1.  Objectives 

The objectives of the proposed macro-financial assistance operation are to: 

•  Contribute to the financing of Moldova's balance of payments and reserve build up 
in the context of a deterioration of Moldova's trade and current account balances in 
the short run; 

•  In this way, help Moldova alleviate the financial constraints on the implementation 

of the PRGF programme;  

•  Facilitate and encourage efforts of the authorities of Moldova to implement reforms 
identified under the EU-Moldova ENP Action Plan and the Economic Growth and 
Poverty Reduction Strategy Paper. 

•  Detailed macroeconomic and structural reform objectives will be further defined in 
the context of a Memorandum of Understanding, to be agreed with the authorities.  

2.2. 

Indicators 

To  monitor  the  fulfilment  of  the  objectives  of  the  programme  throughout  the 
implementation  period  of  the  assistance,  the  Commission  will  use  two  types  of 
indicators:  

•  Adherence  to  IMF-supported  programmes;  it  will  be  a  sine  qua  non  for  the 

implementation of the assistance;  

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•  Specific  indicators  in  the  areas  of  relevant  structural  reforms;  those  indicators 
linked  to  specific  structural  policy  conditionality  will  be  specified  in  the 
aforementioned Memorandum of Understanding. They will follow the policy lines 
anchored in the IMF-supported economic programme, as well as the EU-Moldova 
ENP Action Plan and the Economic Growth and Poverty Reduction Strategy Paper. 

3. 

ALTERNATIVE DELIVERY MECHANISMS AND RISK ASSESSMENT 

3.1.  Delivery mechanisms 

The foreseen macro-financial assistance will be provided in the form of grants. Given 
Moldova’s low level of development, it continues to be deemed appropriate (as it was 
the  case  also  in  the  2002  Council  decision)  to provide  this  assistance  in  the  form  of 
straight grants.  

Macro-financial  assistance  is  an  untied  and  undedicated  macroeconomic  support, 
which  helps  the  beneficiary  meet  its  budgetary  and  external  financing  needs. 
Moreover,  as  experienced  with  similar  operations,  including  in  Moldova,  the 
economic  policy  conditionality  attached  to  this  support  strengthens  the  stabilisation 
and reform process. 

3.2.  Risk assessment 

There are both fiduciary and policy risks related to the macro-financial assistance.  

There  is  a  risk  that  this  assistance,  which  is  not  dedicated  to  specific  expenses 
(contrary to project financing, for example), would be used in a fraudulent way, like 
any other type of assistance. Generally speaking, this risk is related to factors such as 
the independence of the central bank, the quality of systems and procedures related to 
the  management,  control  and  oversight  functions  in  the  financial  circuits  and 
processing  of  such  assistance,  IT  security  and  internal/external  audit  capacity  of  the 
beneficiary authorities.  

To  mitigate  the  risks  of  fraudulent  use,  several  measures  will  be  taken.  The 
Memorandum  of  Understanding  and  the  grant  agreement  will  comprise  a  set  of 
provisions  on  inspection,  fraud  prevention,  audits,  and  recovery  of  funds  in  case  of 
fraud or corruption. Also, the assistance will be paid to clearly identified accounts of 
the  Finance  Ministry  in  the  National  Bank  of  Moldova.  Moreover,  before  the 
agreement  on  the  Memorandum  of  Understanding  is  reached,  the  Commission 
services  will  assess  the  reliability  of  financial  circuits  and  administrative  procedures 
that are relevant to this type of assistance and will determine whether the framework 
for sound financial management of macro-financial assistance is sufficiently effective 
in  Moldova  (for  details,  see  Financial  Statement,  section  9).  In  the  light  of  this 
evaluation,  specific  mechanisms  applying  to  the  management  of  the  funds  by  the 
beneficiaries  may  be  introduced  in  agreement  with  the  national  authorities.  The 
Commission  may  also  use  other  assistance  instruments  at  its  disposal,  notably 
technical  assistance  under  the  Food  Security  Programme  and  Tacis  or  subsequent 
equivalent  programmes,  to  help  the  beneficiary  authorities  improve  their  public 
finance management systems if this area is not sufficiently covered by other donors. 

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Finally,  the  assistance  will  be  liable  to  verification,  control  and  auditing  procedures 
under the responsibility of the Commission, including the European Antifraud Office 
(OLAF), and the European Court of Auditors. 

Furthermore, there is a risk that reform measures will not be implemented as expected. 
This  risk  is  largely  determined  by  the  overall  quality  of  the  policy  and  institutional 
environment  in  the  country  and  above  all  by  the  political  commitment  of  the 
authorities to reforms. The Commission services will maintain close contacts with the 
authorities  during  the  implementation  of  the  macro-financial  assistance  in  order  to 
address quickly any concerns that may arise.  

4. 

ADDED VALUE OF COMMUNITY INVOLVEMENT 

By providing financing complementary to resources made available to Moldova by the 
Bretton  Woods  Institutions,  the  Community  would  encourage  and  strengthen  the 
implementation  of  the  adjustment  and  reform  programmes.  This  will  be  particularly 
important  in  the  areas  targeted  by  the  programme’s  conditionality.  Moreover,  the 
effect of the Community’s involvement will be strengthened as a result of the synergy 
with  other  Community  programmes  for  the  region,  notably  the  Food  Security 
Programme  and  Tacis,  which  target  institution  and  capacity  building  in  the  longer-
term, partly in the same policy areas. The macro-financial assistance is a policy-based 
instrument  and  would  therefore  also  contribute  to  the  process  of  re-orienting  the 
Community’s  future  assistance  to  Moldova  further  to  that  direction  under  the  new 
European Neighbourhood and Partnership Instrument that will become operational in 
2007.  

In a broader perspective, the assistance programme will support the European Union’s 
strategy towards Moldova, in particular in the context of the European Neighbourhood 
Policy. The ENP Action Plan, aiming at establishing an increasingly close relationship 
between  the  EU  and  Moldova,  has  emerged  as  a  powerful  driver  for  the  authorities’ 
stabilisation and reform efforts.  

5. 

GENVAL CRITERIA 

The Commission services have given due consideration to the five Genval criteria.  

Exceptional character: 

result 

financing 

requirements 

in  2007-2008 

Moldova’s 
from  exceptional 
circumstances – balance-of-payments shocks and, to a lesser extent, need to mobilise 
resources  for  the  clearance  of  accumulated  arrears  on  the  official  debt.  Also,  the 
unfavourable  external  environment  adds  substantially  to  the  financing  needs 
associated with the implementation of the policies foreseen in the PRGF arrangement 
–  and,  more  generally,  of  the  policies  contemplated  in  the  ENP  Action  Plan  and  the 
EGPRSP over the medium-term. Within the overall financial effort of the international 
community, the EU MFA will be specifically responding to the unfavourable external 
environment resulting from the external shocks. 

The  exceptional  character  of  the  foreseen  MFA  is  further  stressed  by  the  limited 
timeframe of the programme. The Commission services intend to limit the duration of 

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the implementation of the assistance to 2007 and 2008, which is shorter than the total 
duration  of  the  PRGF  arrangement  (it  expires  in  2009).  Moreover,  the  Commission 
services  intend  to  re-assess  at  the  end  of  2007  the  EU  contribution  to  meeting 
Moldova's  financing  needs  in  2008.  In  determining  the  actual  amount  of  this 
contribution, the Commission services intend to take into consideration progress in the 
implementation  of  the  PRGF  arrangement,  of  the  EGPRSP  and  of  the  EU-Moldova 
Action Plan, and the expected development of budgetary support operations under the 
future European Neighbourhood and  Partnership Instrument (ENPI). It is anticipated 
that  the  first  disbursement  under  ENPI  sectoral  and/or  general  (macroeconomic) 
budgetary support will take place in 2008.  

Political pre-conditions:  

Since  2004,  Moldova  is  one  of  the  EU  partner  countries  in  the  framework  of  the 
European  Neighbourhood  Policy.  It  is  also,  together  with  Ukraine,  the  only  Eastern 
European country that has been implementing a joint ENP Action Plan. The ENP aims 
at  developing  an  increasingly  close  relationship  between  the  EU  and  the  partner 
countries, going beyond past levels of cooperation, at deepening political cooperation 
including in the area of foreign and security policy and in the resolution of the conflict 
in Transnistria, and at promoting economic growth and poverty reduction. 

Complementarity: 

The Community MFA will be complementary to external financing coming from three 
main sources: (i) the Bretton-Woods Institutions, (ii) the Paris Club debt restructuring, 
and  (iii)  budget  support  provided  by  the  bilateral  donors  and  the  Community,  under 
the  Food  Security  Programme.  In  this  context  and  in  the  short  run,  MFA  will  both 
increase substantially the European Union's leverage on Moldova's policy making and 
strengthen  the  country’s  European  aspirations,  and  provide  a  highly  valuable  bridge 
financing  to  help  the  country  weather  the  effects  of  the  unfavourable  external 
environment.  Also,  in  2006-2008,  the  Community  will  continue  supporting  the 
implementation  by  Moldova  of  the  EU-Moldova  Action  Plan  and  of  the  EGPRSP 
through technical assistance and project financing provided under Tacis and the future 
ENPI.  

Conditionality: 

As  usual  with  this  type  of  assistance,  disbursements  under  this  macro-financial 
assistance  will  be  subject  to  progress  in  the  implementation  of  (i)  the  PRGF 
arrangement  with  the  IMF,  and  (ii)  specific  structural  reform  measures  that  will  be 
further defined in the context of a Memorandum of Understanding. Given the nature 
of  the  planned  operation,  in  defining  the  conditionality  in  the  area  of  structural 
policies, particular attention will be paid to public finance management with a view to 
strengthening efficiency, transparency and accountability. Also, the Commission may 
consider targeting specific sectoral policies of particular importance, identified as such 
in the EU-Moldova ENP Action Plan.  

Financial Discipline: 

The Commission services propose to limit the macro-financial assistance to Moldova 
to  an  amount  of  EUR  45  million,  to  be  disbursed  over  a  period  of  in  principle  two 
years.  This  corresponds  to  approximately  one-third  of  the  residual  financing  needs 
identified  by  the  IMF  for  the  years  2007-2008,  i.e.  needs  calculated  in  taking  into 

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account financing provided by the BWIs but not that expected to be provided by the 
Paris  Club  creditors.  Residual  financing  needs  defined  in  this  way  amount  to  some 
USD 160 million or EUR 130 million (at the current exchange rate between the USD 
and  EUR).  The  assistance  will  be  financed  from  the  commitment  appropriations  for 
2007 under budget line 01.03.02, subject to availability of budgetary resources.  

Concerning  sound  financial  management,  the  Commission  services  are  taking  action 
in  order  to  fulfil  the  requirements  of  the  Financial  Regulation.  In  the  context  of  the 
multi-donor coordination in the area of public finance management, the Commission 
has  co-funded,  under  the  technical  assistance  component  of  the  Food  Security 
Programme, a Fiduciary Risk Assessment (FRA) of Moldova. The final report will be 
available  shortly.  Based  on  its  findings  and,  if  necessary,  on  a  complementary 
Operational Assessment (OA) of the reliability of financial circuits and administrative 
controls  at  the  Ministry  of  Finance  and  the  National  Bank  of  Moldova,  the 
Commission  services  will  determine  whether  the  framework  for  sound  financial 
management of macro-financial assistance is sufficiently effective in Moldova. Also, 
the  results  of  the  FRA  and  possibly  of  the  OA  will  be  used  for  the  definition  of 
appropriate conditionality in the area of public finance management, to be included in 
the Memorandum of Understanding. 

6. 

PLANNING FUTURE MONITORING AND EVALUATION 

This  assistance  is  of  exceptional  and  macro-economic  nature  and  its  monitoring  and 
evaluation will be undertaken in line with the standard Commission procedures: 

6.1.  Monitoring 

The  monitoring  system  will  be  ensured  by  the  provision  of  reports  and  data  by  the 
authorities,  as  to  be  set  out  in  the  Memorandum  of  Understanding,  and  the 
organisation  of  review  missions  in  Moldova  by  Commission  staff.  Although  this 
assistance  is  centrally  managed,  where  appropriate,  Commission  Delegation  on  the 
spot may also be called to provide additional reporting.  

In particular, the monitoring of the action by the Commission services will take place 
on the basis of a genuine system of macro-economic and structural policy indicators to 
be agreed with the authorities of Moldova. Given the nature of this assistance, special 
emphasis of the conditionality is expected in the area of public finance, and would be 
defined in close consultation with the IMF and the World Bank, benefiting from their 
assessment of the recipient’s stabilisation and reform. In this process, the Commission 
services may also monitor key areas to be identified in the above-mentioned Fiduciary 
Risk Assessment and possibly Operational Assessment.  

An  annual  report  to  the  European  Parliament  and  to  the  Council  on  the 
implementation of this assistance is foreseen in proposed text of the Council Decision 
on MFA to Moldova. 

6.2.  Evaluation 

In  the  context  of  DG  ECFIN  Multi-annual  Evaluation  Programme,  two  to  three  ex-
post evaluations of MFA operations are planned per year. It is in this framework that 
an  independent  evaluation  of  the  assistance  will  be  carried  out  by  duly  authorised 

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representatives of the Commission in due course. A provision foreseeing the ex-post 
evaluation will be included in the Memorandum of Understanding. Financial resources 
for this evaluation will be drawn from the corresponding MFA budget line.  

7. 

ACHIEVING COST-EFFECTIVENESS 

In  implementing  the  programme,  the  Commission  will  be  guided  by  the  following 
principles:  

•  The assistance will be made available by the Commission to Moldova in principle 
in at least three grant instalments. Each instalment will be released on the basis of a 
satisfactory  track  record  in  implementing  the  macro-economic  programme  under 
the IMF’s Poverty Reduction and Growth Facility and the specific economic policy 
conditions  attached  to  the  assistance.  The  latter  will  be  negotiated  with  the 
authorities as soon as possible and laid down in a Memorandum of Understanding 
concluded to this effect.  

•  The assistance will be made available by the Commission to Moldova in principle 
in at least three grant instalments. Against the current precarious financial situation 
of Moldova, it is envisaged to release a first tranche as soon as appropriate after the 
Council  has  adopted  the  proposal,  and  a  Memorandum  of  Understanding  and  a 
grant  agreement  have  been  agreed  on.  The  subsequent  tranches  of  the  proposed 
assistance will be made available by the Commission to Moldova on the basis of a 
satisfactory track record of the implementation of the PRGF programme of and the 
economic policy and financial conditions attached to the assistance.   

•  In  negotiating  specific  policy  conditions,  the  Commission  will  draw  on  all  the 
expertise,  including  in  the  Bretton  Woods  Institutions  and  in  bilateral  and 
multilateral aid agencies active in the same areas. In addition, the Commission will 
aim at synergies with other Community policies and instruments that could be used 
to support the implementation by the beneficiary of the relevant measures (notably 
the  Food  Security  Programme  and  Tacis  technical  assistance  programme).  Where 
appropriate, links to any related actions under the European Neighbourhood Policy 
can also be established.  

•  This action is exceptional by nature and will not involve an increase in the number 

of Commission staff.  

EN 

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  EN