Proposal for a Council Decision Providing Community macro-financial assistance to Moldova {SEC(2006) 1258}
Date: 2006-10-09
Institutions: European Commission
Subjects: EU aid, Moldova, development aid, economic development, economic stabilisation, financial aid

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 9.10.2006 
COM(2006) 579 final 

2006/0184 (CNS) 

Proposal for a 

COUNCIL DECISION 

Providing Community macro-financial assistance to Moldova 

(presented by the Commission) 

{SEC(2006) 1258} 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

110 

•  Grounds for and objectives of the proposal 

The  Commission  proposes  to  provide  macro-financial  assistance  to  Moldova  in  the 
form of a grant of a maximum amount of EUR 45 million with a view to supporting 
Moldova's balance of payments and the reserve build-up. The proposed assistance will 
help Moldova alleviate the financial constraints on the implementation of its economic 
programme.  It  will  also  facilitate  and  encourage  the  authorities'  efforts  to  implement 
reforms under the EU-Moldova European Neighbourhood Policy Action Plan and the 
Economic Growth and Poverty Reduction Strategy Paper.  

The proposed macro-financial assistance will be exceptional and limited in time, will 
complement  support  from  the  Bretton  Woods  Institutions,  bilateral  donors  and  the 
Paris Club, and will be conditional, in particular, on progress in the implementation of 
the IMF-supported PRGF arrangement. This operation will take place at a time when 
EU-Moldova relations have entered a phase of deeper integration in the context of the 
European Neighbourhood Policy.  

120 

•  General context 

In  the  initial  stage  of  its  transition  to  market  economy,  Moldova  implemented 
successfully a number of first generation reforms. Subsequently, towards the end of the 
nineties  and  in  the  beginning  of  the  current  decade,  reforms  slowed  down  and  the 
government's  administrative  interference  in  the  economy  increased.  Against  this 
background, policy lending by the Bretton Woods Institutions was discontinued. Two 
EU  macro-financial  assistance  operations  for  Moldova  –  a  loan  of  EUR  15  million 
decided in 2000 and a grant of the same amount decided in 20021– could therefore not 
be implemented.  

In this period, Moldova's GDP grew at an average annual growth rate of 7%. Growth 
has  been  driven  by  domestic  demand  boosted  by  booming  remittances  that  have 
increased  over  time  to  more  than  30%  of  GDP.  By  2005,  Moldova's  GDP  per  capita 
had  more  than  doubled  (in  dollar  terms)  compared  to  its  level  in  2000.  Yet,  at  only 
USD 812, it is still by far the lowest in Europe. Moldova is the only country in Europe 
to be classified as low-income by the World Bank.  

Towards  2004-2005,  structural  reforms  re-appeared  on  the  Moldova's  policy  agenda, 
notably  with  the  adoption  by  the  government  of  the  Economic  Growth  and  Poverty 
Reduction  Strategy  Paper  (EGPRSP).  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  economic  policy  intended  to  demonstrate 
this  renewed  stabilisation  and  reform  commitment.  In  view  of  the  results  achieved, 

1 

Council Decisions 2000/452/EC of 10 July 2000 (OJ L 181, 20.7.2000, p.77) and 2002/1106/EC of 19 
December 2002 (OJ L 351, 28.12.2002, p.76). 

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towards  the  end  of  2005,  the  authorities  and  the  IMF  resumed  discussions  on  a  new 
programme  that  could  be  supported  by  a  financing  arrangement  with  the  Fund.  In 
February 2006 an agreement was reached on the parameters of such programme and in 
May  2006  the  IMF  Board  approved  a  three-year  financing  arrangement  under  the 
Poverty Reduction and Growth Facility (PRGF). The approval of the arrangement was 
followed  by  an  agreement  with  the  Paris  Club  of  Moldova's  official  creditors  on  a 
restructuring of accumulated arrears and current payments falling due in the period of 
the  programme  on  the  so-called  Houston  terms.  Helping  the  government  normalise 
Moldova's  relations  with  the  official  creditors  was  one  of  the  key  objectives  of  the 
arrangement.  

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 authorities are committed to limit the budget deficit to 0.5% 
of  GDP  and  the  National  Bank  is  aiming  at  increasing  foreign  exchange  reserves  to 
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 
policies  would  translate  into  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.  

Yet,  the  programme  is  being  implemented  in  a  particularly  difficult  external 
environment.  Already  in  2005,  due  in  particular  to  a  strong  increase  in  oil  prices, 
Moldova's  trade  and  current  account  deficits  had  increased  sharply.  Since  the 
beginning  of  2006,  Moldova  is  facing  additional  balance-of-payments  shocks  –  a 
decision by Russia's gas monopoly, Gazprom, to increase the gas prices it charges to 
Moldova  from  USD  80  per  thousand  cubic  meters  to  USD  110  in  January  2006  and 
USD 160 in July, and a ban on Moldova's exports of wine and alcohol to Russia – that 
make  the  prospects  for  achieving  the  objectives  of  the  PRGF  programme  extremely 
weak.  The  weakening  of  Moldova's  external  accounts  will  also  complicate  the 
achievement  of  the  government's  medium-term  objectives  in  terms  of  growth  and 
poverty  reduction  contained  in  the  government's  Economic  Growth  and  Poverty 
Reduction Strategy Paper, and of the goals of the EU-Moldova ENP Action Plan.  

The  economic  developments  in  Moldova  will  require,  first,  some  adjustment  of  the 
PRGF  programme  and,  second,  additional  exceptional  financing,  on  top  of  the 
financing currently available.  

In the past the EU has provided on several occasions macro-financial assistance (MFA) 
to  Moldova  aimed  at  responding  to  balance-of-payments  shocks.  The  Commission 
considers that the current situation justifies a further recourse to the same instrument. 
EU  MFA  would  contribute  to  meeting  Moldova's  external  financing  requirements  in 
2007 and 2008. 

This is further warranted by deepening EU-Moldova cooperation in the context of the 
European  Neighbourhood  Policy.  Moldova  is  one  of  the  EU  partner  countries  in  this 
context since the ENP was launched in 2004. Moldova is also, together with Ukraine, 

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130 

140 

219 

the only Eastern Neighbourhood country currently implementing an 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  case  of 
Moldova, in the resolution of the conflict in Transnistria, and at promoting economic 
growth and poverty reduction. 

•  Existing provisions in the area of the proposal 

None 

•  Consistency with other policies and objectives of the Union 

EU-Moldova relations have entered a phase of deeper integration since the launching 
of  the  European  Neighbourhood  Policy.  Community's  assistance  through  the  macro-
financial  assistance  instrument  would  contribute  to  the  strengthening  of  the  bilateral 
relations  with  Moldova.  It  is  envisaged  that  from  2007  onwards  the  European 
Neighbourhood and Partnership Instrument (ENPI) will become available to Moldova, 
allowing assistance also in the form of budget support. Preparation of sectoral and/or 
general budget support programmes in favour of Moldova is expected to start as soon 
as  the  ENPI  becomes  operational.  However,  no  disbursements  under  ENPI  budget 
support are anticipated in the near future. Moreover, the instrument of budget support 
under  the  ENPI,  designed  to  support  structural  policies  in  a  medium-  to  long-term 
perspective, is not well adapted to Moldova's current difficulties resulting largely from 
short-term balance of payment shocks.  

Financing under the macro-financial assistance instrument is expected to be available 
well before a possible budget support operation under the ENPI. MFA, as a short-term 
instrument,  will  be  specifically  addressing  the  currently  pressing  external  financing 
needs  of  Moldova  arising  from  a  significant  deterioration  of  the  country's  external 
economic environment. Yet, macro-financial assistance will also support in the interim 
period  structural  reforms  contemplated  in  the  EU-Moldova  Action  Plan  and  the 
Economic Growth and Poverty Reduction Strategy Paper. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

Moldova's Finance Minister Mihail Pop requested financial assistance from the EC in 
May 2006. Commission services have been in contact with the International Monetary 
Fund  and  the  World  Bank  and  bilateral  donors  during  the  preparation  of  the  present 
Commission proposal to discuss assistance needs. The Commission has consulted the 
Economic  and  Financial  Committee  before  submitting  its  proposal.  Following  the 
adoption  of  the  Council  Decision,  the  Commission  services  will  negotiate  with  the 
authorities  of  Moldova  a  Memorandum  of Understanding  and  the  grant  agreement  to 
lay down in detail the implementation modalities of the assistance.  

•  Collection and use of expertise 

229 

There was no need for external expertise. 

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230 

•  Impact assessment 

Because macro-financial assistance is a policy-based instrument, it is particularly well-
suited  to  support  the  efforts  of  the  authorities  of  Moldova  to  improve  the  fiscal 
sustainability in the short-to-medium run. 

Macro-financial  assistance  will  have  an  immediate  impact  on  Moldova's  balance  of 
payments  and  reserves  and  will  in  this  way  contribute  to  the  alleviation  of  financial 
constraints on the implementation of the authorities' economic programme.  

EC assistance will also help the authorities implement short- and medium-term policies 
identified  in  the  EU-Moldova  European  Neighbourhood  Policy  Action  Plan  and  the 
Economic Growth and Poverty Reduction Strategy Paper.  

3)  LEGAL ELEMENTS OF THE PROPOSAL 

305 

•  Summary of the proposed action 

The  Community  shall  make  available  to  Moldova  macro-financial  assistance  in  the 
form of grants of a maximum amount of EUR 45 million. The assistance will be made 
available  in  three  instalments  over  a  period  of  two  years.  The  period  of  the 
implementation of the programme could be extended by one more year. The assistance 
will be managed by the Commission which shall agree with the authorities the specific 
economic  policy  and  financial  conditions  attached  to  the  payment  of  the  grant 
instalments.  Specific  provisions  on  the  prevention  of  fraud  and  other  irregularities, 
consistent with the Financial Regulation, will be duly taken into account.  

310 

329 

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•  Legal basis 

Article 308 of the Treaty 

•  Subsidiarity principle 

The proposal falls under the exclusive competence of the Community. The subsidiarity 
principle therefore does not apply. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s). 

The amount of the assistance corresponds broadly to one-third of the residual financing 
needs of Moldova for the years 2007-2008, covered by the assistance. This is deemed 
an  appropriate  level  of  burden  sharing  for  the  Community,  given  the  assistance 
provided  to  Moldova  by  bilateral  donors  and  creditors  and  the  international  donor 
community at large. 

The  assistance  will  be  fully  consistent  with  the  macroeconomic  targets  already  set  in 
Moldova's  economic  policy  documents,  such  as  the  Memorandum  of  Economic  and 
Financial Policies in the context of the PRGF arrangement with the IMF, approved in 
May 2006. It will be also consistent with longer-term policy objectives contemplated in 
the  Economic  Growth  and  Poverty  Reduction  Strategy  Paper  approved  in  May  2004 

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and  with  the  EU-Moldova  European  Neighbourhood  Policy  Action  Plan  adopted  in 
February 2005. As regards specific conditions attached to the disbursement of the grant 
instalments, the Commission intends to focus on a limited number of areas, including 
in particular public finance management. Also, the Commission may consider targeting 
specific  sectoral  policies  of  particular  importance,  identified  as  such  in  the  EU-
Moldova ENP Action Plan.  

•  Choice of instruments 

Proposed instruments: other. 

Other means would not be adequate for the following reason(s). 

In the absence of a framework regulation for the macro-financial assistance instrument, 
ad hoc Council decisions under Article 308 of the Treaty are the only available legal 
instrument for this assistance. 

4)  BUDGETARY IMPLICATION 

Such  assistance  would  be  financed  from  commitment  appropriations  in  2007  under 
budget line 01 03 02 (Macroeconomic assistance), subject to final approval of the 2007 
EC Budget, with payments taking place in 2007 and 2008. 

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401 

5)  ADDITIONAL INFORMATION 

•  Review/revision/sunset clause 

533 

The proposal includes a sunset clause. 

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2006/0184 (CNS) 

Proposal for a 

COUNCIL DECISION 

Providing Community macro-financial assistance to Moldova 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
308 thereof, 

Having regard to the proposal from the Commission2, 

Having regard to the opinion of the European Parliament3, 

After consulting the Economic and Financial Committee,  

Whereas: 

(1) 

The  authorities  of  Moldova  are  committed  to  economic  stabilisation  and  structural 
reforms,  supported  by  the  International  Monetary  Fund  (IMF)  through  a  three-year 
arrangement  under  the  Poverty  Reduction  and  Growth  Facility  (PRGF)  which  was 
approved on 5 May 2006. Thereafter, the Paris Club creditors agreed on 12 May 2006 
to a restructuring of Moldova's bilateral official debt on the Houston terms,  

(2) 

The  authorities  of  Moldova  adopted  in  May  2004  an  Economic  Growth  and  Poverty 
Reduction Strategy Paper, setting medium-term priorities for government action,  

(3)  Moldova,  on  the  one  hand,  and  the  European  Community  and  its  Member  States  on 
the other hand, have signed a Partnership and Cooperation Agreement, which entered 
into force on 1 July 1998, 

(4) 

Relations  between  Moldova  and  the  European  Union  are  developing  within  the 
framework  of  the  European  Neighbourhood  Policy,  which  is  expected  to  lead  to 
deeper  economic  integration.  The  EU  and  Moldova  have  agreed  on  a  European 
Neighbourhood  Policy  Action  Plan  identifying  short-  and  medium-term  priorities  in 
EU-Moldova relations and related policies, 

(5)  Moldova  faces  substantial  financing  needs  arising  from  a  significant  deterioration  of 

Moldova's external environment, 

(6) 

The Moldovan authorities have requested financial assistance on a concessional basis 
from  the  International  Financial  Institutions,  the  Community  and  other  bilateral 

2 
3 

OJ C , , p. . 
OJ C , , p. . 

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donors. Over and above the financing from the IMF and the World Bank, a substantial 
residual  financing  gap  remains  to  be  covered  to  comfort  the  country’s  balance  of 
payments, strengthen the country’s reserves position and support the policy objectives 
attached to the authorities’ reform efforts, 

(7)  Moldova is eligible to highly concessional loans and grants from the World Bank and 

the IMF,  

(8) 

(9) 

In these circumstances, the Community macro-financial assistance to Moldova should 
be  made  available  in  the  form  of  a  grant,  as  an  appropriate  measure  to  help  the 
beneficiary country at this critical juncture, 

In order to ensure efficient protection of the Community’s financial interests linked to 
the  present  macro-financial  assistance,  it  is  necessary  to  provide  for  appropriate 
measures  by  Moldova  related  to  the  prevention  of  and  to  the  fight  against  fraud, 
corruption and any other irregularities linked to this assistance, as well as for controls 
by the Commission and audits by the Court of Auditors. 

(10)  The release of this grant assistance is without prejudice to the powers of the budgetary 

authority. 

(11)  The macro-financial assistance should be managed by the Commission in consultation 

with the Economic and Financial Committee. 

(12)  The Treaty does not provide for the adoption of this Decision powers other than those 

of Article 308, 

HAS DECIDED AS FOLLOWS:  

Article 1 

1. 

2. 

3. 

The  Community  shall  make  available  to  Moldova  macro-financial  assistance  in  the 
form of a grant of up to EUR 45 million with a view to supporting Moldova's balance 
of  payments  and,  in  this  way,  alleviating  the  financial  constraints  on  the 
implementation of the government's economic programme. 

This  Community  financial  assistance  shall  be  managed  by  the  Commission  in 
consultation with the Economic and Financial Committee and in a manner consistent 
with the agreements or understandings reached  between  the International Monetary 
Fund (IMF) and Moldova. 

The  Community  financial  assistance  shall  be  made  available  for  two  years  starting 
from  the  first  day  after  the  entry  into  force  of  this  decision.  However,  if 
circumstances  so  require,  the  Commission,  after  consultation  of  the  Economic  and 
Financial Committee, may decide to extend the availability period by a maximum of 
one year. 

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1. 

2. 

3. 

1. 

2. 

3. 

4. 

Article 2 

The  Commission  is  empowered  to  agree  with  the  authorities  of  Moldova,  after 
consultation with the Economic and Financial Committee, the economic policy and 
financial conditions attached to this assistance, to be laid down in a Memorandum of 
Understanding and a Grant Agreement. These conditions shall be consistent with the 
agreements or understandings referred to in Article 1(2).  

During  the  implementation  of  the  Community  assistance,  the  Commission  shall 
monitor  the  soundness  of  Moldova's  financial  circuits,  administrative  procedures, 
internal  and  external  control  mechanisms  which  are  relevant  to  this  Community 
macro-financial assistance. 

The Commission shall verify at regular intervals, in collaboration with the Economic 
and Financial Committee and in coordination with the IMF, that economic policies in 
Moldova are in accordance with the objectives of this assistance and that the agreed 
economic policy and financial conditions are being satisfactorily fulfilled. 

Article 3 

This  assistance  shall  be  made  available  by  the  Commission  to  Moldova  in  three 
instalments.  

The first instalment shall be released on the basis of a satisfactory implementation of 
the  economic  programme  supported  by  the  IMF  under  the  Poverty  Reduction  and 
Growth  Facility  and  of  the  EU-Moldova  European  Neighbourhood  Policy  Action 
Plan.  

The second and any further instalments shall be released on the basis of a satisfactory 
implementation of the economic programme supported by the IMF under the Poverty 
Reduction  and  Growth  Facility  and  of  the  EU-Moldova  European  Neighbourhood 
Policy Action Plan, and any other measures agreed with the Commission as set out in 
Article 2(1), and not before one quarter after the release of the previous instalment. 

The funds shall be paid to the National Bank of Moldova. The final recipient of the 
funds will be the Ministry of Finances of Moldova. 

Article 4 

The implementation of this assistance shall take place in accordance with the provisions of the 
Financial Regulation applicable to the General Budget of the European Communities and its 
implementing  rules.  In  particular,  the  Memorandum  of  Understanding  and  the  Grant 
Agreement  to  be  agreed  with  the  authorities  of  Moldova  shall  provide  for  appropriate 
measures by Moldova related to the prevention of and the fight against fraud, corruption and 
other  irregularities  linked  to  this  assistance.  It  shall  also  provide  for  controls  by  the 
Commission,  including  the  European  Anti-Fraud  Office  (OLAF),  with  the  right  to  perform 
on-the-spot  checks  and  inspections,  and  for  audits  by  the  Court  of  Auditors,  where 
appropriate, to be carried out on the spot.  

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Article 5 

By 31 August of each year the Commission shall submit to the European Parliament and to 
the  Council  a  report,  including  an  evaluation  on  the  implementation  of  this  Decision  in  the 
previous year. 

This  Decision  shall  take  effect  on  the  day  of  its  publication  in  the  Official  Journal  of  the 
European Union.  

Article 6 

Done at Brussels, 

For the Council 
The President

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LEGISLATIVE FINANCIAL STATEMENT 

Policy area: Title 01 – Economic and Financial Affairs 

Activity: 03 – International economic and financial affairs 

TITLE OF ACTION: MACRO-FINANCIAL ASSISTANCE TO MOLDOVA 

1. 

BUDGET LINE(S) + HEADING(S) 

Article 01 03 02 — Macroeconomic assistance 

2. 

OVERALL FIGURES  

2.1. 

Total allocation for action (Part B): EUR 45 million for commitment 

Budget  available  for  2007  (preliminary  draft  budget):  EUR  79.591  million  in 
Commitment  Appropriations  and  EUR  100.814  million  in  Payment  Appropriations 
for the budget line 01 03 02, subject to approval of the budget 2007. 

2.2. 

Period of application: 

Start year: 2007, expiry year: 2008 

2.3. 

Overall multi-annual estimate of expenditure: 

(a) 

Indicative schedule of commitment appropriations/payment appropriations (financial 
intervention) (see point 6.1.1) 

€ Million (to three decimal places) 

Commitments 

2008 

2009 

2007 
45.000    

Payments 

30.000  15.000 

Total 
45.000 

45.000 

(b) 

Technical and administrative assistance and support expenditure (see point 6.1.2) 

Commitments 

0.030 

0.030 

Payments 

0.030 

0.030 

Subtotal a+b 

Commitments 

45.030 

0.030

Payments 

30.030 

15.030

0.060 

0.060 

45.060 

45.060 

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(c) 

Overall  financial  impact  of  human  resources  and  other  administrative  expenditure  
(see points 7.2 and 7.3) 

Commitments/ 
payments 

0.165 

0.165 

TOTAL a+b+c 

Commitments 

45.195  0.195 

Payments 

30.195  15.195 

0.330 

45.390 

45.390 

2.4. 

Compatibility with financial programming and financial perspective 

The proposal is compatible with existing financial programming 

2.5. 

Financial impact on revenue 

The proposal has no financial implications on revenues 

3. 

BUDGET CHARACTERISTICS 

Type of expenditure 

New 

EFTA 
contribution 

Contributions 
from applicant 
countries 

Heading in 
financial 
perspective 

Non-
compulsory 

Differen-
tiated 

4. 

LEGAL BASIS  

NO 

NO 

NO 

No 4 

Article 308 of the Treaty 

5. 

DESCRIPTION AND GROUNDS 

5.1. 

Need for Community intervention 4 

5.1.1.  Objectives pursued 

The proposed assistance consists of a Community grant of up to EUR 45 million to 
Moldova  (to  be  financed  from  the  General  Budget)  with  a  view  to  supporting 
Moldova's  balance  of  payments  and  the  reserve  build-up  in  the  context  of  a 
substantial deterioration of the trade and current account balances in the short run. In 
this  way,  the  proposed  assistance  will  help  Moldova  alleviate  the  financial 
constraints  on  the  implementation  of  the  PRGF  programme,  of  the  EU-Moldova 
European Neighbourhood Policy (ENP) Action Plan and the government's Economic 
Growth and Poverty Reduction Strategy.  

4 

For further information, see separate explanatory note. 

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This assistance is complementary to the resources provided to Moldova, in support of 
the authorities’ economic stabilisation and structural reform programme, by the IMF, 
the  World  Bank  and  bilateral  donors  and  the  EU,  under  the  budget  support 
component of the Food Security Programme, and to debt relief granted by the official 
creditors. 

5.1.2.  Measures taken in connection with ex ante evaluation  

in  
An  ex  ante  evaluation  was  carried  out  by  Commission 
July-August  2006  (by  Unit  D3  of  the  Economic  and  Financial  Affairs  Directorate-
General).  

services 

5.1.3.  Measures taken following ex post evaluation 

No  ex-post  evaluation  of  past  Community  macro-financial  assistance  provided  to 
Moldova has been carried out yet.  

5.2. 

Action envisaged and budget intervention arrangements 

This assistance will take the form of a straight grant which would be released in three 
or, if appropriate, four instalments. The first instalment is to be released on the basis 
of  a  Memorandum  of  Understanding  to  be  agreed  between  the  authorities  of 
Moldova  and  the  Community.  The  subsequent  instalments  shall  be  released  on  the 
basis of a satisfactory completion of the economic policy conditions and not before 
one quarter after the release of the previous instalment.  

The  quantitative  performance  criteria  attached  to  this  assistance  would  be  those 
stipulated under the macro-economic framework for the present PRGF arrangement 
agreed  between  Moldova  and  the  IMF.  Accordingly,  before  the  release  of  each 
instalment  of  this  assistance,  the  Commission  services,  in  co-operation  with  the 
national authorities and the IMF staff, shall verify that the quantitative performance 
criteria have been respected or new understandings have been reached.  

In  addition,  the  Commission  shall  agree  with  the  authorities  a  number  of  specific 
policy conditions which have to be met before the second and possible further grant 
instalments are released. These policy conditions shall be consistent with agreements 
or  understandings  reached  by  Moldova  with  the  IMF  and  the  World  Bank.  It  is 
envisaged at this stage that these conditions would have a particular focus on public 
finance management reform and administration. The Commission may also consider 
targeting specific sectoral policies of particular importance, identified as such in the 
EU-Moldova ENP Action Plan.  

5.3.  Methods of implementation 

This assistance will be implemented in the form of centralised direct management by 
the Commission using regular staff. 

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6. 

FINANCIAL IMPACT 

6.1. 

Total financial impact on Part B - (over the entire programming period) 

The  payments  of  the  assistance  from  budget  line  01 03 02  will  be  subject  to 
compliance by Moldova with the conditions attached to the assistance as described 
under 5.2.  

6.1.1.  Financial intervention 

Commitments (in € million to three decimal places) 

Breakdown 

2007 

Grant 

instalments 

to 

45.000 

2008 

- 

2009 

Moldova 

TOTAL  45.000 

Total 

45.000 

45.000 

6.1.2.  Technical  and  administrative  assistance,  support  expenditure  and  IT  expenditure 

(commitment appropriations) 

2007 

2008 

2009 

Total 

1) 
administrative assistance 

Technical 

and 

Technical 

a) 
offices

assistance 

b)  Other 
administrative assistance: 

technical 

and 

- intra muros: 

- extra muros: 

of  which  for  construction 
and 
of 
maintenance 
computerised  management 
systems 

Subtotal 1 

2) Support expenditure 

Studies 
a) 
Assessments) 

(Operational 

0.030 

0.030 

0.060 

b) Meetings of experts 

c) Information and 
publications 

Subtotal 2 

TOTAL  0.030 

0.030 

0.060 

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6.2. 

Calculation  of  costs  by  measure  envisaged  in  Part  B  (over  the  entire 
programming period)5 

Breakdown  

Commitments (in € million to three decimal places) 

Type  
of outputs 
(projects, files ) 

Number of 
outputs 
(total for years 
1…n)  

Average unit 
cost 

Total cost 

(total for years 
1…n) 

1 

2 

3 

4=(2X3) 

Action 1 

- Measure 1 

- Measure 2  

Action 2 

- Measure 1- 

- Measure 2 

- Measure 3 

etc. 

TOTAL COST 

7. 

IMPACT ON STAFF AND ADMINISTRATIVE EXPENDITURE  

7.1. 

Impact on human resources 

The  tasks  related  to  the  management  of  the  assistance  will  be  carried  out  through 
staff redeployment, where necessary, and will not involve an increase in the number 
of Commission staff.  

Types of post 

Staff to be assigned to management of the 
action using existing and/or additional 
resources 

Number of 
permanent posts 

Number of 
temporary posts 

Total 

Description of tasks deriving from the 
action 

Officials 
temporary staff 

or 

1/3 

A 

B 

C 

Other human resources 

Total 

1/3 

1/3 

1/3 

prepare 

memoranda 

E.g. 
of 
understanding  and  grant  agreements, 
liaise with the authorities and the IFIs, 
liaise  with  external  experts  for  the 
conduct 
operational 
prepare 
review  missions 
Commission  staff 
reports,  prepare 
Commission  procedures  related  to  the 
management of the assistance 

assessments, 
and 

5 

For further information, see separate explanatory note. 

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7.2. 

Overall financial impact of human resources 

Type of human resources 

Amount (€) 

Method of calculation *  

Officials 

Temporary staff 

Other human resources 

30,500 

1/3 x average annual expenditure for an 
A*5 – A*12 grade official 

(specify budget line) 

Total  30,500 

The amounts are total expenditure for twelve months. 

7.3. 

Other administrative expenditure deriving from the action 

Amount € 

Method of calculation 

10,000 

Two missions per year for two persons 

Budget line 

(number and heading) 

Overall allocation (Title A7) 

A0701 – Missions 

A07030 – Meetings 
A07031 – Compulsory committees 1 
A07032 – Non-compulsory committees 1 

A07040 – Conferences 

A0705 – Studies and consultations 

Other expenditure (specify) - An ex-post evaluation - 

125,000 

Estimated 
expenditure 
total 
€250,000 for the service contract 

of 

Information systems (A-5001/A-4300) 

Other expenditure - Part A (specify) 

Total  135,000 

The amounts are total expenditure for twelve months. 

1 Specify the type of committee and the group to which it belongs. 

I. 

II. 

Annual total (7.2 + 7.3) 

Duration of action 

III. 

Total cost of action (I x II) 

€ 165,500 

2 years 

€ 331,000 

8. 

FOLLOW-UP AND EVALUATION 

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

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8.1. 

Follow-up arrangements 

The monitoring of the action by the Commission services will take place on the basis 
of macro-economic and structural policy indicators to be agreed with the authorities 
in  a  Memorandum  of  Understanding.  The  authorities  will  be  required  to  report  on 
those indicators to the Commission services on a regular basis. The Delegation of the 
European  Commission  in  Chisinau  will  also  provide  regular  reporting  on  issues 
relevant for the monitoring of the assistance. The Commission services will remain 
in close contact with the IMF and the World Bank to benefit from their expertise and 
activities in Moldova. 

8.2. 

Arrangements and schedule for the planned evaluation 

An  annual  report  to  the  European  Parliament  and  to  the  Council  is  foreseen  in  the 
proposed Council decision, comprising an assessment of the implementation of this 
assistance  operation.  Furthermore,  an  independent  ex-post  evaluation  of  the 
assistance  is  planned  to  be  carried  out  by  the  Commission  or  its  duly  authorised 
representatives one to two years after the expiry of the implementation period. 

9. 

ANTI-FRAUD MEASURES 

Commission  services  have  put  in  place  an  on-going  programme  of  Operational 
Assessments  of  the  financial  circuits  and  administrative  procedures  in  all  third 
countries benefiting from the Community macro-financial assistance in order to fulfil 
requirements  of  the  Financial  Regulation  applicable  to  the  General  Budget  of  the 
European Communities.  

Also,  in  the  context  of  the  multi-donor  coordination  in  the  area  of  public  finance 
management,  the  Commission  has  co-funded  a  Fiduciary  Risk  Assessment  of 
Moldova. The final report will be available shortly.  

In Moldova, 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.  The  findings  of  the  Fiduciary  Risk 
Assessment and all available conclusions of relevant reports of the IMF or the World 
Bank  will  be  taken  into  consideration  in  this  assessment.  In  this  context,  the 
Commission  services  may  decide  to  carry  out,  with  the  support  of  duly  mandated 
external  experts,  an  Operational  Assessment  of 
the  financial  circuits  and 
administrative procedures of the beneficiary authorities. The results of the Fiduciary 
Risk  Assessment  and  possibly  of  the  Operational  Assessment  will  be  used  for  the 
definition of appropriate conditionality in the area of public finance management. 

The  proposed  legal  basis  for  macro-financial  assistance  to  Moldova  includes  a 
provision on fraud prevention measures. These measures will be elaborated further in 
a  Memorandum  of  Understanding  and  a  grant  agreement.  It  is  envisaged  that  a 
number of specific policy conditions will be attached to the assistance, mainly in the 
area  of  public  finance  management,  with  a  view  to  strengthening  efficiency, 
transparency and accountability. 

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

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