COMMISSION STAFF WORKING DOCUMENT ex-ante evaluation statement Accompanying the document Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending DECISION (EU) 2022/563 as regards the amount of macro-financial assistance to the Republic of Moldova
Date: 2023-01-24
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Community loan, EU aid, European neighbourhood policy, Moldova, economic reform, economic stabilisation, financial aid, macro-financial assistance

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.1.2023  SWD(2023) 25 final  COMMISSION STAFF WORKING DOCUMENT ex-ante evaluation statement Accompanying the document Proposal for a  DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending DECISION (EU) 2022/563 as regards the amount of macro-financial assistance to the Republic of Moldova {COM(2023) 53 final}  
 
 
Ex-ante evaluation statement 

EU Macro-Financial Assistance to the Republic of Moldova 

TABLE OF CONTENTS 

1.1 Introduction .................................................................................................................................... 2 

1.2 Moldova's macroeconomic situation .............................................................................................. 3 

1.3 IMF and other donor support ......................................................................................................... 5 

1.4 External financing needs ................................................................................................................ 7 

1.5 Structural reforms .......................................................................................................................... 9 

2.1 Objectives .................................................................................................................................... 14 

2.2 Monitoring indicators ................................................................................................................... 14 

3.1 Delivery mechanisms ................................................................................................................... 15 

3.2 Risk assessment ........................................................................................................................... 16 

5.1 Exceptional Character and Limited Time-frame .......................................................................... 17 

5.2 Political preconditions and EU-Moldova relations ...................................................................... 18 

5.3 Complementarity .......................................................................................................................... 19 

5.4 Conditionality .............................................................................................................................. 20 

5.5 Financial Discipline ..................................................................................................................... 20 

6.1 Evaluation .................................................................................................................................... 21 

6.2 Achieving cost-effectiveness ....................................................................................................... 21 

ASSESSMENT ON DEMOCRACY, HUMAN RIGHTS, RULE OF LAW AND REFORMS IN THE 
REPUBLIC OF MOLDOVA ............................................................................................................. 22 

1 

 
 
PROBLEM ANALYSIS AND NEEDS ASSESSMENT 

1.1 

 Introduction 

The global economic situation proved increasingly difficult. The conditions underlying Moldova’s 
first  request  for  macro-financial  assistance  in  2022  have  further  worsened.  Moldova  is  both 
directly and indirectly exposed to the intensification of Russia’s war of aggression against Ukraine. 
Over half a million people have crossed the Moldovan border since the start of the war, of which 
about 90 000 remain in the country (corresponding to some 3.4% of the population). The Moldovan 
economy  has  therefore  been  under  considerable  pressure.  Following  a  marked  post-pandemic 
recovery in 2021, growth in the first nine months of 2022 plummeted, entering a deep recession. 
Since October 2021, Moldova has also been facing an energy crisis of considerable magnitude 
(illustrating Russia’s readiness to use energy as a tool of influence). Strained economic conditions 
have led to some increasing domestic political tensions, especially among the opposition parties 
that  organized  numerous  street  protests,  and  in  the  two  regions  of  Moldova,  Transnistria  and 
Gagauzia, which traditionally have close links to Russia. Notwithstanding a strong willingness to 
aid migrants from Ukraine and to undertake reforms that could address some of its own challenges, 
Moldova  continues  to  struggle  with  multiple  and  amplifying  crises  at  the  same  time,  requiring 
additional support and financial assistance from international partners.  

To briefly recall and in relation to the energy crisis, on 19 November 2021, Moldova requested a 
new Macro-Financial Assistance (MFA) operation. The MFA amounting to EUR 150 million (in 
loans on concessional terms and grants) was adopted by the Parliament and Council on 6 April 
2022 and entered into force on 18 July. Following successful fulfilment of the policy conditions 
attached  to  the  first  instalment,  the  first  disbursement  was  made  on  1  August  2022.  Under  the 
ongoing operation, Moldova has still EUR 100 million (in loans on concessional terms and grants) 
in two instalments available until January 2025.  

In line with regular MFA procedures, the operation was made available to Moldova in conjunction 
with a new IMF arrangement, which was adopted in December 2021 and augmented in May 2022. 
The overall expanded support by the IMF under the three-year Extended Credit Facility/Extended 
Fund Facility (ECF/EFF) programme amounts to USD 795 million.  

After the outbreak of Russia’s war of aggression in neighbouring Ukraine, Moldova has received 
considerable assistance from other international partners. In April 2022, the International Financial 
Institutions and bilateral donors set up the Moldova Support Platform to pledge further financial 
assistance.  

Notwithstanding the reinforced support from Moldova’s international partners, the energy crisis 
poses severe challenges, reflecting Moldova’s dependence on gas supplied by Russia. In addition, 
the bombings of key energy infrastructure in Ukraine have led Ukraine to stop electricity exports 

2 

 
 
 
 
to Moldova and thereby cut the country from a major alternative source of electricity supply. The 
authorities have tried to address the crisis by taking measures aimed at considerably reducing the 
energy consumption as well as supporting the most vulnerable consumers. The cost of the subsidies 
for  energy  tariffs  is  estimated  at  EUR  250  million  for  2023,  fuelling  Moldova’s  fiscal  needs. 
According to the latest IMF’s estimates (December 2022), Moldova’s overall external financing 
gap in 2023 has increased by EUR 430 million (around 3% of GDP), compared to the IMF first 
programme review (September 2022) – resulting in an overall financing gap of about 5% of GDP 
for 2023.  

Against  this  backdrop,  the  Commission  submits  to  the  European  Parliament  and  the  Council  a 
proposal to increase the existing MFA assistance to Moldova by EUR 145 million, of which EUR 
100 million in loans and EUR 45 million in grants. The proposed legal basis is Article 212 of the 
TFEU.  

The additional MFA assistance would be disbursed in two new instalments, linked to additional 
policy conditionality, good progress on the implementation of the Association Agreement and the 
Deep  and Comprehensive Free Trade Area Agreement (DCFTA)  as well as  continued  positive 
track record in the implantation of the IMF programme. The policy conditions attached to the two 
new  instalments  would  build  on  the  policy  actions  agreed  under  the  current  MFA  in  the 
Memorandum  of  Understanding,  as  well  as  ensure  coherence  with  the  EU-Moldova  policy 
priorities and the Moldovan government agenda. The additional support is  also in line with the 
enhanced  EU-Moldova  relations,  underpinned  by  the  candidate  country  status,  which  Moldova 
was granted on 23 June 2022.  

As further elaborated in this Commission Staff Working Document, the Commission considers, 
based  also  on  the  assessment  of  the  political  situation  made  by  the  European  External  Action 
Service,  that  the  political  and  economic  pre-conditions  for  the  proposed  MFA  increase  are 
satisfied. 

1.2 

 Moldova's macroeconomic situation 

The Russian invasion of Ukraine had a strong negative impact on the Moldovan economy amid an 
increasingly challenging global context.  In January-September 2022, growth plummeted by 4% 
year-on-year, suggesting a deep recession for the year overall.  The contraction was driven largely 
by  a  fall  in  household  consumption  and  investment.  On  the  production  side,  agriculture  had  a 
strongly negative impact on growth, following weak output due to a draught in the summer. The 
energy crisis that intensified in 2022 has put additional pressure on Moldova’s finances. The sharp 
rise in energy prices contributed to the record high inflation and on the fiscal side, it necessitated 
further spending on subsidies for the most vulnerable consumers.  

In 2023, Moldova’s outlook remains bleak. It is set to be further impacted by the intensifying of 
Russia’s attacks on Ukraine as well as the economic slow-down across the EU (Moldova’s key 

3 

 
 
trading partner). According to the latest IMF forecast (December 2022), in 2023, growth will pick 
up only moderately, to 1.5%, and it will go back to its pre-crisis levels only in 2024/2025.   

In 2023 inflation is set to decelerate markedly, yet remaining in the double-digit levels, averaging 
at 13.7%, compared to 28.5% in 2022. The spike in energy and food prices drove the high inflation 
in 2022, peaking at 34% in October. In response to the strong inflationary pressure, the central 
bank revised the key interest rate three times last year (by a cumulative 9 percentage points), to 
21.5%. By end-year inflation began to ease, yet moderately (to 31% in November), prompting a 
slight downward adjustment of the base rate to 20%. 

The budget deficit is set to remain wide in 2023, at 6% of GDP, compared to 4.2% of GDP in 
2022.  Much  of  the  widening  can  be  accounted  for  higher  spending  on  the  most  vulnerable 
consumers  because  of  the  spike  in  energy  tariffs  and  some  public  salary  increases,  deemed 
necessary given the soaring inflation. Moldova’s public debt-to-GDP ratio, while low compared 
to most of its regional peers, is set to increase to 38% in 2023, against 36% of GDP by end-2022. 
About  95%  of  Moldova’s  public  external  debt  was  extended  by  multilateral  creditors  at 
concessional terms. Nevertheless, due to high sensitivity to external shocks, last year, the IMF has 
revised Moldova’s risk of debt distress from low to medium. 

On the external side, the current account deficit remains high, at 13.7% in the third quarter of 2022. 
It is driven largely by a high negative trade balance, at about 32% of GDP in the quoted period. 
However, at 14.2% of GDP, remittances remained broadly stable, despite some initial projections 
that transfers from abroad, especially, Russia and the Commonwealth of Independent States would 
fall markedly. The net foreign direct investment has presented some resilience in the first half of 
2022 (largely due to companies’ high reinvested earnings), but given the uncertainty caused by 
Russia’s war of aggression against Ukraine, it is projected to decrease sharply, down to 0.4% of 
GDP for 2022 overall, according to the IMF forecast (December 2022). 

Since the start of the Russian invasion of Ukraine, Moldova’s foreign currency reserves have been 
highly volatile, which has prompted sizable interventions by the central bank. Initially, Moldova’s 
foreign  currency  reserves  decreased  considerably  from  USD  3.9  billion  at  the  end  of  2021 
(covering 5.5 months of imports) to a trough of USD 3.3 billion (covering 4.5 months of imports) 
in April 2022. This was largely caused by a rapid withdrawal of bank deposits. The Moldovan leu 
also depreciated against the US dollar by around 7% in the first half of 2022. Although the reserve 
levels  have  been  restored  by  end-2022,  risks  on  the  downside,  related  largely  to  the  ongoing 
Russia’s war of aggression against Ukraine, remain. The central bank projects a drop in reserves 
at the start of 2023, partly due to a mild economic recovery and higher import demand, as well as 
additional fluctuations in the FX market. 

4 

 
 
Table 1: Moldova – Selected macroeconomic indicators, 2019-2025 

Sources: IMF staff estimates, World Bank, MoF  

1.3 

 IMF and other donor support 

Since 1993, Moldova has benefited from several IMF arrangements. The current one, Extended 
Credit  Facility/Extended  Fund  Facility  of  USD  558  million  (equivalent  to  SDR  400 million  or 
232% of Moldova’s quota in the Fund), was adopted in December 2021 for a period of 40 months. 
The programme was set to help Moldova address it’s urgent financing needs, following the gas 
crisis in October 2021. The reform priorities were set, among others, to strengthen the transparency 
and  accountability  of  public  institutions  in  Moldova  (especially  in  the  financial  sector)  and 
improve  policy  implementation.  The  programme  is  also  set  to  tackle  some  of  the  key  reform 
challenges, especially, on anti-corruption and good governance.  

After the outbreak of Russia’s aggression against Ukraine and given the sizable economic effects, 
Moldova requested an ad hoc review and an augmentation of the standing arrangement. Following 
a positive opinion by the Board, in May 2022, the IMF programme was increased by USD 260 
million, of which USD 144 million were disbursed immediately after the Fund’s decision. The 
IMF programme increase was set to help Moldova address its urgent balance of payment needs 
stemming from the war as well as a spike in energy prices. At the time of the augmentation, the 
Fund assessed that in terms of reform implementation, overall progress was positive. However, 
given  heightened  uncertainty,  the  IMF  proposed  a  higher  frequency  review  schedule  and  two 
additional policy conditions, related to financial sector oversight and anti-corruption. Moldova’s 

5 

 
 
 
capacity to repay its obligations was assessed as adequate and although risks to the programme 
were considered substantial, they were mitigated by strong ownership and reform commitment of 
the programme by the authorities.  

In August 2022, the IMF conducted the first (regular) programme review, followed by a staff-level 
agreement in September. Good progress on the policy reforms implementation was maintained. 
Thus, after a positive decision by the Board, the IMF disbursed another USD 27 million under the 
ongoing facility. According to the IMF report (29 September), Moldova’s financing needs for 2022 
were fully covered, yet given the many risks on the downside, it was assessed that a financing gap 
may  open  in  2023.  The  Fund  drew  particular  attention  to  risks  stemming  from  Moldova’s 
vulnerable energy position (being fully reliant on Russian gas and with imports of electricity from 
Ukraine cut down due to the invasion) and its exposure to the war in Ukraine.  

During  October-November  2022,  the  IMF  conducted  its  second  programme  review.  The 
macroeconomic assessment was largely maintained, while projecting a slightly larger recession in 
2022  (of  -1.5%)  and  a  milder  rebound  in  2023.  The  IMF  also  confirmed  the  growing  external 
financing and therefore an increased urgency for further international support. The pressure stems 
largely from the ongoing energy crisis (including both gas and electricity) prompting additional 
fiscal needs, as well as high inflation and limited ability to borrow domestically. The IMF has also 
assessed that Moldova’s foreign currency reserves are set to remain volatile, which increases the 
uncertainty surrounding the outlook for 2023. Since the start of  Russia’s war of  aggression against 
Ukraine, in the first half of 2022, Moldova’s foreign currency reserves have decreased markedly, 
down to USD 3.3 billion at its’ lowest points in April. The draw on reserves was caused by the 
depreciation  of  the  Moldovan  leu  against  the  US  dollar,  leading  to  heavy  central  bank 
interventions. Given the ongoing risks, the FX market in Moldova is exposed to possible further 
volatility, remaining too small and too shallow to absorb such shocks.  

In light on the ongoing crises, international partners have stepped up their support for Moldova. 
The  World  Bank  is  in  the  process  of  preparing  its  new  Country  Partnership  Framework  with 
Moldova for the years 2023-2027. In July 2022, the World Bank had also approved an Emergency 
Response, Resilience and Competitiveness Development Policy Orientation in the amount of USD 
159.2  million  for  Moldova  to  help  the  government  mitigate  the  impacts  of    Russia’s  war  of 
aggression  against  Ukraine  on  refugees  and  households  and  build  resilience  in  the  face  of  the 
ongoing  shocks.  The  Policy  Orientation  includes  a  loan  component  of  USD  43  million  by  the 
International  Bank for Reconstruction and Development, a concessional  contribution on a non-
reimbursable  basis  of  USD  9.24  million  under  the  Concessional  Financing  Facility  and  an 
International Development Association credit of USD 107 million. 

As regards assistance from the EU, following the outbreak of the energy crisis, the Commission 
has mobilized additional resources to provide immediate support to Moldova. EUR 60 million was 
made available through a budget support operation under a State and Resilience Building Contract, 
in line with the priorities of the 2021-2027 Multiannual Indicative Programme that was disbursed 

6 

 
 
in December 2021. In 2022, after the outbreak of Russia’s war of aggression against Ukraine, and 
given its negative effects on the Moldovan economy, additional budget support assistance of EUR 
75 million was disbursed in July, under the existing State Building and Resilience contract. Further 
budget support payments are expected in 2023 and notably another EUR 50 million budget support 
is  currently  under  preparation  to  complement  the  MFA  increase.  This  operation  will  aim  at 
mitigating  the  socio-economic  impact  of  the  rising  gas  prices,  strengthening  the  Government’s 
capacity to provide tailor-made support to the most vulnerable groups and increasing Moldova’s 
energy security in the medium to long-term.  

In addition to policy-based support, Moldova also benefits from substantial project-based loans 
from the European Bank for Reconstruction and Development to increase its energy security. In 
2022, the EBRD has disbursed a total of EUR 300 million to Moldova to increase the country’s 
gas reserves in Ukraine and Romania under the Resilience and Livelihoods Framework supporting 
Ukraine and affected neighbouring countries (of total EUR 2 billion available financing under the 
Framework). 

Moreover,  in  April  2022,  the  international  financial  institutions  and  bilateral  donors  set  up  the 
Moldova Support Platform to mobilise additional financial assistance. The Support Platform has, 
until now, convened for three meetings in April, July, and November, resulting in total confirmed 
assistance of EUR 1.3 billion (inclusive of the ongoing IMF and MFA operations) to date. The 
authorities remain, however, in close contact with international Partners to confirm further pledges 
for 2023 and 2024.  

1.4 

 External financing needs  

The  IMF  projections  following  their  recent  second-review  programme  mission  point  to  a 
significant increase in Moldova’s external financing needs by USD 433 million for 2023 relative 
to the previous programme review. The widening of the external  financing gap can broadly be 
attributed  to  an  increase  in  Moldova’s  overall  fiscal  needs  and  a  precautionary  build-up  of 
international reserves.  

The total external financing gap estimated at USD 803 million in 2023 will be partly covered by 
an increase in the IMF and World Bank disbursements to a total of USD 333 million and by USD 
173 million provided by other official bilateral donors. The Commission would contribute to the 
financing of the remaining gap by USD 297 million, of which EU grants account for USD 107 
million (EUR 105 million) and MFA funds for USD 199 million (EUR 195 million). The MFA 
funds would include one instalment of EUR 50 million provided under the on-going operation, 
complemented by the proposed EUR 145 million increase in the current MFA.  

The proposed increased MFA, including the existing amount, corresponds to 33% of the estimated 
residual  financing  gap  in  2022-2024,  in  line  with  the  principles  of  fair  burden-sharing  among 
donors  and  value  added  of  the  EU’s  MFA  enshrined  in  the  Joint  Declaration  of  2013  of  the 
Parliament and the Council on Macro-Financial Assistance. The proposed share is in line with the 
conclusions of the ECOFIN Council of 8 October 2002, which specified that “[…] for candidate 

7 

 
 
countries  (countries  which  have  signed  Europe  or  Association  Agreements  with  the  EU)  and 
European countries which are concerned by the Stabilization and Association process (countries 
which  have  signed,  or  are  expected  to  sign,  Stabilisation  and  Association  Agreement),  the 
maximum  Community  involvement  may  amount  to  as  much  as  60%  of  the  country’s  residual 
financing needs over and above contributions from multilaterals’’. 

As regards 2024, any outlook is surrounded by great uncertainty, but there does not seem to be an 
additional financing gap at present, although risks on the downside remain, especially linked to 
the war against Ukraine. Additional risks are also related to the high net domestic issuance planned 
for  2024  (EUR  490  million),  which  are  partly  mitigated  by  the  ongoing  support  from  bilateral 
donors in the context of the Moldova Support Platform.  

The MFA features as part of the Union’s consolidated and increased assistance to Moldova in line 
with the close EU-Moldova cooperation under the Association Agreement (in place since 2016) 
and the candidate country status granted in July 2022.  

This  level  of  MFA  support  is  justified  by  the  exceptional  crisis  context  in  Moldova  triggered 
largely by Russia’s war of aggression against Ukraine and the way Russia is ready to use energy 
to destabilise countries. These developments led to more expensive and uncertain energy supplies 
for Moldova, resulting in an economic recession in 2022 and with considerable spill-over effects 
into early 2023, when the energy needs appear to be most acute. With limited buffers by Moldova 
to address the crisis, the proposed MFA operation would be a key component of the additional 
support  package  of  EUR  250  million  pledged  by  the  EU  to  help  Moldova  weather  the  energy 
emergency.1 

1   The  support  package  was  announced  by  the  Commission  President  on  10  November  2022  during  her  visit  to 

Moldova. 

8 

 
 
 
 
 
 
 
 
 
 
 
                                                           
Table 2: Moldova’s External Financing Gap and Potential Financing Sources 

Sources: Latest IMF staff estimates and projections (January 2022) and commission staff calculations. 

1.5 

 Structural reforms 

Despite  a  challenging  economic  situation,  the  Moldovan  authorities  have  continued  to  pursue 
structural reforms implementation under their ambitious government agenda  “Moldova in good 
times, 2021-2025". These efforts accelerated following the granting of candidate country status to 
Moldova by the EU on 23 June 2022, and additional steps have been taken in several areas. Indeed, 
the Commission’s Opinion (of 17 June 2022) presented nine steps that Moldova needs to address 
to  make  further  progress  on  their  path  towards  the  EU.  The  specific  policy  areas  include  fight 
against  corruption  and  the  rule  of  law,  as  well  as  good  governance,  better  public  services  and 
increased human rights protection. Additionally, the process of reform implementation has also 
been  supported  by  substantial  financial  and  technical  assistance  provided  by  multilateral  and 
bilateral partners, including the IMF, World Bank, and the EU. On the EU side, this included the 
implementation of policy reforms needed for the disbursement of the first instalment under the 
ongoing MFA operation. As such, Moldova has successfully completed three important conditions 
related to financial sector governance, the 2014 bank fraud asset recovery as well as key energy 
sector reforms (increasing the country’s gas storage capacity).  

Notwithstanding  these  efforts  and  a  strong  commitment  by  the  authorities  to  pursue  further 
reforms, overall progress has also been affected by the overlapping crises, exposing challenges 
regarding  institutional  capacity  and  lack  of  human  resources  in  public  administration.  The 
following  section  will  take  stock  of  the  reform  progress  made  since  July  2021  (when  the  new 
government was elected), in the key sectors and areas, especially those that are supported under 

9 

 
 
 
the ongoing MFA. It will also look at areas for further improvement, which is of relevance for new 
policy conditions under the proposal for an increased MFA to Moldova. 

Public finance management and public administration reform  

Overall,  the  Moldovan  authorities  have  been  successful  in  conducting  sound  macro-economic 
policies  and  aligning  the  rules  with  international  standards  to  ensure  prudent  and  transparent 
management of public finances. The 2013-2020 Public Finance Management (PFM) Strategy has 
been well implemented, and its ex- post assessment served as a basis for the new PFM strategy, 
which is to be adopted shortly. Moldova’s public administration suffers, however, from a lack of 
expert capacity and of skilled human resources. These challenges exist both at the structural level 
as well as in ensuring that the existing talent can be retained, and that new staff is attracted to work 
in the public sector.  

The Moldova authorities remain committed to the adoption of a new PFM Strategy, in line with 
the EU conditionality under the current MFA. Following a public consultation process, the strategy 
is to be adopted by the Moldovan Parliament by the end January 2023. Overall, it notes the good 
progress achieved so far, with a positive assessment under the Public Expenditure and Financial 
Accountability Programme (PEFA). Key improvements have been made especially in terms of the 
accuracy of macro-economic, budgetary and debt projections.  

Nevertheless, the public procurement process in Moldova requires further efforts. According to 
the  World  Bank’s  2021  assessment  report,  the  public  procurement  legislation,  especially  the 
secondary  legislation,  necessitates  revision.  Centralised  procurement  is  underdeveloped  and  is 
hampered by regulatory problems as well as an inadequate e-procurement system.  

The public administration in Moldova continues to suffer from significant capacity constraints, 
which, until now, have been addressed only partly. The State Chancellery prepared a concept note 
for a new public administration strategy (covering central and local administration reform), to be 
adopted  shortly.  This  should  serve  as  a  first  step  towards  a  fully-fledged,  updated  Public 
Administration Reform Strategy. There is also significant scope for improvement regarding the 
salary system in Moldova. As a first step, in May 2022, an assessment of the salary system of the 
public finance sector was launched together with a functional review of the ministries. 

Rule of law and fight against corruption  

Over the years, and especially since the bank fraud crisis of 2014, the fight against corruption has 
been  presented  as  a  key  priority  for  Moldova.  Until  the  parliamentary  elections  in  July  2021, 
however, progress  on reform implementation  has been  slow. The political  context in  Moldova, 
with  many  leadership  changes,  has  not  been  favourable  to  a  thorough  and  transparent  reform 
process.  The  anti-corruption  institutions  have  suffered  from  lack  of  leadership,  while 
investigations, prosecutions and trials in key cases having been regularly postponed. In addition, 
commitment to improving the overarching asset management strategy could be assessed as partial 

10 

 
 
only.  It  is  noteworthy  how  the  current  pro-reform  authorities  have  made  the  fight  against 
corruption their key priority, with several important and decisive steps to strengthen Moldova’s 
anti-corruption system. Nonetheless, the area continues to suffer from some limitations, leaving 
room for considerable improvement.  

Moldova has made some progress on combatting corruption. The implementation of the National 
Anti-Corruption  Strategy  for  2017-2023  continues.  However,  for  what  concerns  prevention  of 
corruption, progress remains limited, especially with respect to high-level corruption, including 
among members of the parliament, judges, and prosecutors. In line with the MFA conditionality, 
Moldova is expected to better delineate the competences of the various anti-corruption institutions, 
especially the division of tasks between the Anti-Corruption Prosecutors Office and the National 
Anti-Corruption Centre. Some progress has  also  been made in bringing corruption cases to the 
court  and  in  improving  their  prosecution.  As  regards  the  2014  bank  fraud  asset  recovery,  the 
authorities have made notable progress on the preparation of the new Asset Recovery Programme, 
to  be  adopted  shortly.  Fight  against  corruption  and  the  rule  of  law  remain  a  key  government 
priority.  This  is  also  evident  by  the  authorities’  strong  commitment  to  the  pre-vetting  process, 
which  concerns  the  assessment  of  the  candidates  for  membership  of  the  Superior  Council  of 
Magistrates and the Superior Council of Prosecutors.  

As regards anti-money laundering, the law on anti-money laundering sanctions was  adopted in 
May  2020  and  entered  into  force  in  December  2020,  but  secondary  legislation  is  still  under 
preparation. A draft law redefining the beneficial owner concept was approved at first reading by 
Parliament in July 2020, and the conformity with international standards will be checked once it 
is  adopted.  Adoption  of  the  Law  on  Amending  and  Supplementing  the  Anti  Money 
Laundering/Countering  the  Financing  of  Terrorism  (AML/CFT)  to  implement  the  5th  EU 
AML/CFT Directive is pending. This draft law notably aims at introducing a new definition of the 
beneficial owners that should enhance the traceability of ownership. The finalisation and adoption 
of a new law on control of assets and conflict of interests is also pending. 

Financial sector stability  

With support from the IMF as well as the EU, the banking sector in Moldova has gone through an 
important reform process. Following the bank fraud crisis in 2014, the three major systemic banks 
in  Moldova  have  been  restructured  and  are  now  owned  by  transparent  and  partly  international 
shareholders.  In  addition,  the  independence  of  the  central  bank  has  been  considerably 
strengthened. All three Deputy Governors have been appointed since the last MFA operation in a 
way that strengthens the institution’s capacity and independence. Important improvements have 
also  taken  place  as  regards  the  non-bank  credit  institutions;  overall,  good  cooperation  is  being 
noted between the National Bank of Moldova and the National Commission for Financial Markets.  

In  September  2020,  the  Parliament  adopted  legislation  providing  for  a  transfer  of  supervision 
powers from the National Commission for Financial Markets to the National Bank of Moldova, 

11 

 
 
taking  effect  as  of  1  July  2023.  The  National  Bank  has  approved  the  reform  concept  and  is 
analysing the legal changes needed. A Memorandum of Understanding has been signed between 
the  Financial  Market  Commission  and  the  National  Bank  and  practical  da-to-day  cooperation 
continues.  The  changes  were  necessitated  by  the  growing  portfolio  of  insurance  and  non-bank 
credit institutions and weak supervisory powers. Nevertheless, despite notable progress made on 
advancing the reform process, some areas still call for improvements, for example, as regards the 
delimitation  of  competences  between  the  two  institutions,  especially  concerning  consumer 
protection  and  financial  inclusion,  with  a  clear  task  allocation  for  the  Financial  Market 
Commission.  

The Parliament has also adopted the long-awaited changes to the law on insurance, aligning it to 
some extent the EU Solvency II Directive.  

Moldova has also made some initial steps in joining the European Single Area Payment System 
(SEPA). As a first step in the process, and in line with the MFA conditionality, the Tax Code, the 
Contravention  Code,  the  legislation  on  foreign  exchange  regulation  and  on  prevention  and 
combatting money laundering have been aligned with the Directive (EU) 2015/2366. However, 
further  engagement  by  Moldova  on  participation  in  the  SEPA  system  is  needed  to  ensure  that 
further criteria are met (for example, on the Payment Service Directive, Transfer of Funds, Capital 
Requirement Directive, and others).  

Business environment  

Moldova has been characterised by a considerable informal sector as well as a sizable footprint of 
the large state-owned enterprises on the economy. The authorities are thus committed to improving 
good governance and fight against corruption (especially at high level), which is set to provide for 
a more investment friendly environment in Moldova. In terms of trade relations, Moldova has also 
maintained  good  progress  on  the  implementation  of  the  DCFTA,  progressively  aligning  its 
legislation with EU standards.  

In  line  with  the  DCFTA,  the  conflicting  trade  provisions  put  in  place  by  amendments  to  the 
Domestic  Trade  Law  in  December  2020  were  reversed  on  26  August  2022.  Moldova  has  also 
continued the work on aligning its Customs Code to the Union’s Customs Code, and the revised 
law is set to enter into force by mid-2023. Concerning other trade-related matters, further efforts 
are envisaged (in line with the conditions under the current MFA) to repeal the law on the Free 
Economic  Zones,  which provides for customs duty exemptions  on imported goods through the 
Zone in  accordance with  Article 341 of the  Association Agreement and in  line with the Union 
Customs  Code.  In  addition,  while  Moldova  has  made  improvements  on  implementing  its 
competition legislation, the independence and impartiality of the Competition Council remains an 
issue.  

12 

 
 
Within the area of business environment, there is scope for further improvement as regards the 
state-owned  enterprises,  especially  for  what  concerns  the  corporate  governance  structure  and 
selection procedures of the members in the management boards.  

Energy sector reforms  

Moldova withstood a gas crisis in late 2021, and important progress has been achieved since then 
in  terms  of  diversifying  supplies  and  increasing  the  resilience  of  the  energy  system,  but  the 
situation  in  the  energy  sector  has  remained  fragile.  In  2022,  largely  due  to  Russia’s  war  of 
aggression against Ukraine, Moldova’s energy supply, both in terms of gas and electricity, was 
further challenged. The country has been fully dependent on gas imports from Russia’s Gazprom, 
which, over the autumn-winter period in 2022, progressively diminished its supply to Moldova. 
As a result, the authorities had to face considerably higher prices and seek for alternative energy 
supply  solutions,  where  EU  support  proved  crucial.  Several  steps  have  been  taken  to  improve 
Moldova's energy security, yet, as outlined below there remains scope for further improvement.    

On 2 November 2022, Moldova imported for the first time natural gas through physical reverse 
flow  from  the  Slovak-Ukraine  border,  marking  a  key  step  towards  reducing  its  dependence  on 
Gazprom. On 3 December 2022, for the first time gas was transported from Romania to Moldova 
through  the  Iasi-Ungheni  pipeline.    In  the  electricity  sector,  since  March  2022,  Moldova’s 
electricity  grid  has  been  synchronised  with  the  European  Network  of  Transmission  System 
Operators for Electricity. This has been a key development in helping Moldova address the current 
crisis in the electricity sector, that has suffered considerably after key infrastructure in Ukraine has 
been destroyed by Russia, thereby putting an end to this flow (Moldova previously imported 30% 
of its electricity from Ukraine).  

However,  progress  on  unbundling  (the  separation  of  energy  supply  and  generation  from  the 
operation of transmission networks) has been mixed; it is more advanced in the electricity sector 
than in the gas sector. In the electricity sector (in line with MFA conditionality) the Electricity 
Market Rules (including balancing market and imbalance procedure) entered into force on 1 June 
2022.  The  law  also  introduced  the  Independent  System  Operator  model  for  unbundling  in 
electricity, and Moldelectrica, the transmission system operator, performed the unbundling process 
on  the  new  model.  Moldelectrica  requested  certification  to  the  National  Agency  for  Energy 
Regulation in September 2022. 

On gas, VestMoldTransgaz transmission system operator was certified in September 2021 by the 
National Agency for Energy Regulation, but the other major gas transmission system operator, 
MoldovaTransgaz, failed in the unbundling process and was not certified.  

Overall,  the  current  level  of  concentration  in  electricity  and  gas  markets  is  high.  However,  in 
August 2022, Moldova aligned with the rules for ensuring wholesale energy market integrity and 
transparency under the Regulation on Wholesale Energy Market Integrity and Transparency. This 

13 

 
 
provides the Moldovan energy regulator with the instruments needed to monitor the market and 
sanction possible unlawful behaviour (manipulation or uncompetitive behaviour).  

The renewable energy sector, as well as energy efficiency efforts in Moldova, also present scope 
for  further  improvements,  both  of  which  could  contribute  to  increasing  the  country’s  energy 
security. Moldova’s main challenges in the field include lack of market-based support mechanisms 
to develop cost-efficient and transparent renewable power capacities, as well as lack of financing 
and slow implementation of energy efficiency measures in some sectors (especially, the residential 
and transport sectors).  

2. 

2.1 

OBJECTIVES AND RELATED INDICATORS OF THE MACRO-FINANCIAL ASSISTANCE 

 Objectives 

The objectives of the proposed MFA operation are to:  

i)  Contribute to covering the external financing needs of Moldova in the context of a sizeable 

external financing gap.  

ii)  Support  the  fiscal  consolidation  effort  and  external  stabilisation  expected  in  the  IMF 

programme. 

iii) Support  structural  reform  efforts  aimed  at  improving  overall  macroeconomic  management, 
strengthening  economic  governance  and  transparency,  and  improving  the  conditions  for 
sustainable growth. 

iv)  Facilitate and encourage efforts by the Moldovan authorities to implement measures identified 
under  the  EU-Moldova  Association  Agreement  and  in  the  context  of  bilateral  cooperation 
programmes  (including  capacity-building),  support  regulatory  convergence  and  economic 
integration with the EU and strengthen the EU's economic policy dialogue with the authorities. 

2.2 

 Monitoring indicators 

The fulfilment of the objectives of the assistance will be assessed by the Commission, including 
in the context of the ex-post evaluation (see below), on the basis of the following indicators:  

i)   Progress with macroeconomic and financial stabilisation, notably by assessing the degree of 

adherence to the IMF-supported programme.  

ii)  Progress with the implementation of structural reforms, notably the specific policy actions to 
be identified as conditions for disbursement of the assistance, which will be negotiated between 
the Commission and the Moldovan authorities and included in an amended Memorandum of 
Understanding. 

14 

 
 
 
 
 
 
3.  DELIVERY MECHANISMS AND RISK ASSESSMENT 

3.1 

 Delivery mechanisms 

The MFA increase under consideration is expected to cover part of the residual financing gap that 
opened in 2023 and would amount to a maximum of EUR 145 million. The Commission proposes 
to provide the assistance in the form of a medium-term loan of up to EUR 100 million and grants 
of up to EUR 45 million. Given the proposed size of the operation, the Commission is considering 
releasing the assistance in two additional instalments, evenly disbursed between the two regular 
instalments of the ongoing MFA – the second and the final one.  

As the proposed amount is significant in terms of its share in the coverage of the residual financing 
(i.e. by 33% as noted above), it is important to ensure the MFA’s value added, notably by providing 
the EU with sufficient leverage to promote reforms. To that end, additional policy conditions will 
be attached  also  to  the  new MFA disbursements, with  each  additional  instalment  being  also as 
usual subject to good progress with the IMF programme and the specific actions agreed with the 
EU in the Memorandum of Understanding as well as the fulfilment of the political preconditions 
(see below). Given the crisis context and Moldova’s administrative capacity, particular attention 
will be given to the feasibility of structural reform actions in the envisaged time frame.  

The  inclusion  of  an  increased  grant  element  remains  consistent  with  the  methodology  for 
determining the use of grants and loans in EU MFA, as endorsed by the Economic and Financial 
Committee in January 2011, which takes into account the following criteria:  

Firstly, Moldova is a lower middle-income country with a relatively low per capita Gross National 
Income (GNI) at 16 070 in purchasing power parity in 2021, according to World Bank data.  

Secondly, while Moldova’s public debt dynamic is judged to be sustainable by the IMF, the debt-
to-GDP ratio increased from 27.4% at the end of 2019 (prior to the pandemic, the gas crisis, and 
the ongoing war in Ukraine) to 32% in the first half of 2022. Moreover, the risk of debt distress in 
Moldova  has  been  recently  revised  by  the  IMF  from  low  to  moderate,  given  the  country’s 
sensitivity to ongoing crises.   

Thirdly, Moldova remains eligible for concessional financing from the IMF, and blended financing 
from  the  World  Bank,  having  recently  (2020)  graduated  from  IDA  and  being  considered  as 
creditworthy  for  borrowing  by  the  International  Bank  for  Reconstruction  and  Development 
(IBRD).  

While Moldova meets the criteria for receiving at least part of the proposed MFA in grants, the 
fact that it is not a Poverty Reduction and Growth Trust/International Development Association-
only country, but a blended one, and the constraints in the EU budget for MFA grants argue in 
favour of using both loans and grants in the proposed operation. MFA loans are extended at highly 
concessional  terms,  with  long maturities (of up to 15  years) and a low interest  rate (the rate at 
which the EU, benefiting from its triple A rating, borrows the funds in the international capital 
markets). 

15 

 
 
3.2 

 Risk assessment 

There are fiduciary, credit, policy and political risks related to the proposed MFA operation. 

There  is  a  risk  that  the  MFA,  which  is  not  dedicated  to  specific  expenses  (contrary  to  project 
financing, for example), could be used in a fraudulent way. In general terms, this risk is related to 
factors such as the quality of management systems in the central bank and the ministry of finance, 
administrative  procedures,  control  and  oversight  functions,  the  security  of  IT  systems  and  the 
appropriateness of internal and external audit capabilities. 

To mitigate the risks of fraudulent use several measures will be taken. First, the Loan Agreement 
and the MFA 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 a 
dedicated account of the National Bank of Moldova.  

Moreover, in line with the requirements of the Financial Regulation, in the context of the COVID-
19 MFA package, the Commission services have carried out an Operational Assessment of the 
financial and administrative circuits of Moldova in order to ascertain that the procedures in place 
for the management of programme assistance, including MFA, provide adequate guarantees. The 
final report of the Operational Assessment, prepared by a consultancy company, was received in 
June 2020. The report notes clear progress in PFM systems and other financial circuits since 2015 
when the last exercise was undertaken and concludes that the status of Moldova’s financial circuits 
and procedures is deemed favourable for a subsequent MFA operation. Developments in this area 
will continue to be closely monitored also through the regular progress reports on PFM reforms 
produced by the EU Delegation in Chisinau.  

The Commission is also using budget support assistance to help the Moldovan authorities improve 
their PFM systems and these efforts are strongly supported by other donors. 

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

A second risk stems from the possibility that Moldova will fail to service the financial liabilities 
towards the EU stemming from the proposed MFA loans (default or credit risk), which could be 
caused by a significant additional deterioration of the balance of payments and fiscal position of 
the country or/and by unforeseen events. This risk is mitigated, however, by the fact that the EU’s 
increased MFA would be part of an international package of official assistance led by the IMF that 
is  supporting  an  adjustment  and  reform  programme  aimed  at  restoring  fiscal  and  balance  of 
payments sustainability through the implementation of a series of policy measures, included those 
agreed  in  the  MoU  between  the  EU  and  the  Moldovan  authorities  and  new  additions  thereto. 
Moreover, the risks for the EU budget are in the first instance covered by the EU’s External Action 
Guarantee. 

Another  key  risk  to  the  operation  stems  from  further  developments  in  Ukraine,  especially  the 
intensification and prolongation of the war, as well as in the energy sector, and thus its impact on 

16 

 
 
the political stability in Moldova. This, in turn, could weaken the prospects of further necessary 
economic reforms. A derailment of the reform process could also put the objectives of the IMF-
supported programme in jeopardy, endanger macroeconomic stability and prevent  the effective 
disbursement of the EU's MFA.  

Further, there are risks stemming from a possible weakening of the European and global economic 
environment (taking into account Moldova’s dependence on the EU market) and further volatility 
in the energy market, which would have an important effect on Moldova’s fiscal and balance of 
payments situation. 

Having made a thorough assessment of the risks, the Commission services consider that there are 
sufficient grounds and guarantees to proceed with the proposed increase in the MFA to Moldova.  

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 EU INVOLVEMENT 

The Union's financial support to Moldova reflects the country's strategic importance to the EU in 
the  context  of  the  candidate  country  status  granted  on  23  June  2022,  and  the  European 
Neighbourhood  Policy.  The  MFA  instrument  is  a  policy-based  instrument  directed  to  alleviate 
short- and medium-term external financial needs. As a part of the overall EU package of assistance, 
it  would  contribute  to  supporting  the  European  Union's  objectives  of  economic  stability  and 
economic development  in Moldova. By  further reinforcing support to the authorities' efforts to 
establish  a  more  stable  macroeconomic  framework  and  improve  economic  governance,  the 
proposed  increase  in  assistance  would  help  improve  the  effectiveness  of  other  EU  financial 
assistance to the country, including the existing MFA and budgetary support operations. 

The EU's increased MFA would also complement the standard EU aid packages mobilised under 
the NDICI. By supporting the adoption, by the Moldovan authorities, of an appropriate framework 
for macroeconomic policy and structural reforms, the EU's increased MFA would further enhance 
the added value and effectiveness of the EU's involvement through other financial instruments. 
The proposed increased MFA would further raise the EU's leverage on policy making in Moldova, 
helping steer the country towards a reform trajectory that should restore macroeconomic stability, 
increase energy security, address governance problems, and boost potential growth in the longer 
run. 

5.  CHARACTERISTICS OF MACRO-FINANCIAL ASSISTANCE 

5.1 

 Exceptional Character and Limited Time-frame 

The increased MFA operation would remain exceptional, aiming to support the restoration of a 
sustainable external finance situation for Moldova. It would run in parallel to the IMF ECF/EFF 
arrangement, with a staff level agreement adopted in December 2021.  

17 

 
 
The increased assistance is expected to be implemented in 2023 due to the widening of the external 
financing gap. The disbursement of the first additional instalment could take place in Q3 2023, 
and the second in Q4 2023. All disbursements are conditional on the IMF programme remaining 
on  track  and  on  a  number  of  policy  measures,  agreed  with  the  EU  and  added  to  the  existing 
Memorandum  of  Understanding  attached  to  the  MFA  operation.  While  in  the  short-term  the 
country faces substantial balance of payments financing needs, the macroeconomic and structural 
adjustment programme agreed with the IMF and supported by the increased MFA is expected to 
produce a gradual strengthening of the balance of payments and fiscal positions. 

5.2 

 Political preconditions and EU-Moldova relations 

A  pre-condition  for  granting  MFA  is  that  the  eligible  country  respects  effective  democratic 
mechanisms,  including  a  multi-party  parliamentary  system  and  the  rule  of  law,  and  guarantees 
respect for human rights.  

The  Moldovan  authorities  remain  aligned  on  a  pro-reform  and  pro-European  agenda,  taking 
decisive steps towards the required structural reforms in line with the EU-Moldova Association 
Agreement, including its Deep and Comprehensive Free Trade Area, and the nine steps identified 
in the European Commission’s opinion on Moldova’s application for membership of the European 
Union. 

In particular, Moldovan government remains strongly committed to delivering on its reform goals 
aimed at enhancing democratisation and the rule of law. A comprehensive reform of the justice 
sector is ongoing. The Constitution was amended to significantly improve the legal framework 
concerning  the  independence,  accountability,  and  efficiency  of  the  judiciary  and  judicial 
administration,  in  accordance  with  recommendations  from  the  Council  of  Europe/Venice 
Commission. The pre-vetting of the candidates for the superior councils of judges and prosecutors 
is ongoing, their integrity being assessed by an independent commission established with EU and 
international  support.  Moldova  is  preparing  the  legislative  framework  for  the  reform  of  the 
Supreme  Court  of  Justice  and  further  vetting  of  top  positions  in  the  judiciary  and  prosecution. 
Cooperation with Moldova on key reforms has been satisfactory but due to strong political pressure 
to advance with reforms, there is a risk that speed could be prioritised over quality. Therefore, it 
remains crucial that reforms are fully in line with the Constitution, European standards, and the 
recommendations of the EU and other international partners.  

Moldova  has  also  shown  commitment  to  address  key  challenges  related  to  labour  rights,  in 
particular  as  regards  informal  employment  and  the  need  to  strengthen  the  labour  inspections 
system. 

While deeply impacted by the ongoing Russian aggression against Ukraine, Moldova continues to 
actively support refugees fleeing Ukraine, hosting the highest number of refugees per capita among 
the neighbouring countries. Moldovan authorities have clearly condemned the Russian aggression 
and have aligned to the EU’s declarations and positions in the international for a, despite a severe 

18 

 
 
gas and electricity crisis caused by Russia’s weaponisation of energy and hybrid actions aimed at 
social and political destabilisation. 

The  latest  rounds  of  parliamentary  elections  in  July  2021  were,  according  to  the  Office  for 
Democratic Institutions and Human Rights, well administered and competitive and fundamental 
freedoms  were  largely  respected.  Authorities  have  worked  on  addressing  outstanding 
recommendations by the Office in areas such as effective campaign finance oversight, political 
bias of news outlets and the impartiality of the Central Election Committee, in accordance to the 
opinion  of  the  Venice  Commission.  New  members  of  the  Central  Electoral  Commission  were 
appointed in September 2021 and a new Electoral Code was adopted in December 2022.  

In terms of media freedom, cases of intimidation and attacks on journalists have decreased and 
steps have been taken to strengthen the capacity of regulatory institutions (Audiovisual Council, 
Competition  Council).  Moldova’s  ranking  in  the  World  Press  Freedom  Index  (under  new 
methodology) has improved from 89 in 2021 to 40 in 2022, however, the concentration of media 
ownership and non-transparent media financing remains high. 

EU-Moldova relations have entered a strategic phase with the Council decision to grant Moldova 
EU candidate country status on 23 June 2022, endorsing the Commission’s Opinion of 17 June. 
The candidate status was granted on the understanding that a number of reform steps will be taken 
by  the  country  (notably  on  the  rule  of  law,  justice  reform  and  anti-corruption,  as  well  as 
fundamental rights). The Moldovan government reacted swiftly by adopting an Action Plan for 
implementing the above-mentioned steps. 

The  Association  Agreement  (including  the  DCFTA),  which  was  signed  on  27  June  2014  and 
entered fully into force on 1 July 2016, and the Association Agenda remains the legal basis for 
carrying out further joint work on reforms and alignment of legislation in many areas. The new 
EU-Moldova Association Agenda 2021-2027 was adopted on 22 August 2022.  

There is also a very close framework of bilateral relations between the EU and Moldova under the 
Association Agreement, which became even closer with the recognition of Moldova’s European 
perspective and the candidate status granted by the European Council. The political pre-condition 
for considering an MFA may therefore be considered to be satisfied.2 

In sum, Moldova has a democratic political system based on the rule of law and the respect for 
human rights and is taking steps to strengthen its democratic institutions, the rule of law including 
judicial independence, integrity and accountability, and address the serious governance problems.  

5.3 

 Complementarity 

The  proposed  increased  MFA  would  continue  to  complement  the  assistance  provided  by  other 
multilateral and bilateral donors in the context of the IMF-sponsored economic programme. Based 

2   A complete assessment of the satisfaction of the political criterion for MFA will be provided by the European 
External  Action  Service,  as  it  is  usual  practice,  at  the  time  of  the  adoption  by  the  Commission  of  the  MFA 
proposal. 

19 

 
 
                                                           
on the information currently available and assuming an IMF programme of a structure as described 
in the previous section, multilateral and bilateral donors other than the EU are expected to cover 
about  52%  of  the  estimated  external  financing  gap  in  2022-24,  ensuring  reasonable  burden-
sharing.  The  EU's  increased  MFA  would  also  continue  to  complement  the  standard  EU  aid 
packages mobilised under the NDICI. By supporting the adoption, by the Moldovan authorities, 
of  an  appropriate  framework  for  macroeconomic  policy  and  structural  reforms,  the  EU's 
augmented MFA would further enhance the added value and effectiveness of the EU's involvement 
through other financial instruments. The proposed increased MFA would further enhance the EU's 
leverage  on  policy  making  in  Moldova,  helping  steer  the  country  towards  a  sustained  reform 
trajectory to restore macroeconomic stability, address governance problems and boost potential 
growth in the longer run and in a sustainable manner. 

5.4 

 Conditionality 

Disbursements under the proposed augmented MFA operation would continue to be conditional 
on successful programme reviews under the IMF programme. In addition, the Commission and 
the Moldovan authorities would agree on a specific set of structural reform measures, to be added 
to the existing Memorandum of Understanding. These additional reform measures would support 
the authorities’ reform agenda and complement the programmes agreed with the IMF, the World 
Bank  and  other  donors,  as  well  as  the  policy  programmes  associated  with  the  EU’s  budgetary 
support operations, while being consistent with the ones already agreed for the underlying MFA. 
They would be consistent with the main economic reform priorities agreed between the EU and 
Moldova  in  the  context  of  the  Association  Agreement,  including  its  DCFTA,  the  Association 
Agenda,  the  enlargement  process  and  Moldova's  government  priorities  and  other  strategic 
documents.  

The Commission will seek a broad consensus with the Moldovan authorities, so as to ensure their 
ownership and foster smooth implementation of the agreed conditionality. These policy conditions 
should  address  some  of  the  fundamental  weaknesses  shown  over  the  years  by  the  Moldovan 
economy and economic governance system. The conditions will remain in line with the priority 
areas under the EU-Moldova cooperation, including the existing MFA, such as public and financial 
sector governance, the rule of law and fight against corruption, strengthening the business climate 
as well as energy sector reforms.  

5.5 

 Financial Discipline 

The  proposed  EUR  145  million  increase  in  the  MFA  operation  for  Moldova  is  foreseen  to  be 
disbursed in two equal instalments to be released in 2023, within the ongoing MFA operation. The 
financial programming over the 2022-2023 period allows for a grant component of EUR 45 million 
to be financed from the available budget on budget line 14 20 03 01 “Macro-financial assistance 
(MFA) - grants''. For the loan component of EUR 100 million, the required provisioning at a rate 
of  9%  of  the  External  Action  Guarantee  will  be  programmed  under  the  Neighbourhood, 
Development and International Cooperation Instrument (NDICI), for a total amount of EUR 10.8 
million (budget line 14 02 01 70 “NDICI – Provisioning of the Common Provisioning Fund”).  

20 

 
 
6.  EVALUATION AND COST-EFFECTIVENESS 

This assistance is of exceptional and macroeconomic nature and its evaluation will be undertaken 
in line with the standard Commission procedures.  

6.1 

 Evaluation 

Ex-post evaluations of MFA operations are foreseen in the Multi-Annual Evaluation Programme 
of  the  Commission's  Directorate-General  for  Economic  and  Financial  Affairs.  An  ex-post 
evaluation of the proposed increased MFA to Moldova will be launched within a period of two 
years after the availability period has expired. A provision for the ex-post evaluation is included 
in  the  proposed  Decision  for  the  increased  assistance,  and  also  already  features  in  the 
Memorandum of Understanding linked to the original MFA operation. Budget appropriations from 
the macro-financial assistance grant budget line will be used for this evaluation.  

6.2 

 Achieving cost-effectiveness 

The proposed increased assistance would continue to entail a high degree of cost effectiveness for 
several reasons:  

i)   Since  the  assistance  would  continue  to  be  leveraged  by  that  provided  by  the  international 
financial institutions, with which, as noted, it would be closely coordinated, its ultimate overall 
impact  could  be  very  significant  compared  to  its  cost.  Moreover,  in  negotiating  additional 
specific  policy  conditions,  the  Commission  will  be  able  to  draw  on  the  expertise  of  those 
institutions, including the IMF and the World Bank, and to influence their  conditionality as 
well in ways that will take into account the EU's views.  

ii)  Providing coordinated macroeconomic support to Moldova on behalf of the EU countries, the 
increased MFA would continue to be more cost efficient than the provision of a similar total 
amount of financial support by EU Member States individually.  

iii)  A substantial part of the proposed additional assistance would be provided in the form of loans, 

the budgetary impact of which is more limited. 

iv)  Finally,  the  Commission  will  aim  at  achieving  synergies  with  other  EU  policies  and 
instruments used to support the implementation by the beneficiary of the relevant measures 
(notably in the area of PFM).  

21 

 
 
 
 
 
 
 
ANNEX 

EUROPEAN EXTERNAL ACTION SERVICE 

Head of Division 

EURCA.5 - Georgia, Moldova, Armenia, Azerbaijan, 
Belarus 

DIRECTORATE Russia, Eastern Partnership, 
Central Asia Regional Cooperation & OSCE 

Brussels, 13 January 2023 

ASSESSMENT ON DEMOCRACY, HUMAN RIGHTS, RULE OF LAW AND REFORMS IN THE 
REPUBLIC OF MOLDOVA 

The Constitution of the Republic of Moldova (hereinafter Moldova) establishes a state of law governed by 
principles  of  the  separation  of  powers,  political  pluralism,  human  rights  and  freedoms,  observance  of 
International  Law  and  International  Treaties.  Today,  people  in  Moldova  generally  enjoy  all  major 
fundamental rights and freedoms. However, the consolidation of democracy and the rule of law needs to 
continue.  

Ever since the presidential elections in 2020 and parliamentary elections in 2021 Moldova’s presidency, 
government, and parliament remain aligned on the same ambitious reform agenda, focusing on justice 
reform, anti-corruption, and efforts to deal with the legacy of vested interests. The required structural 
reforms in line with EU-Moldova Association Agreement and its Deep and Comprehensive Free Trade Area 
as well as the nine steps identified in the European Commission’s opinion on Moldova’s application for 
membership of the European Union are ongoing. Throughout  its period in office,  the government has 
shown strong commitment to deliver on its electoral promises, in line with its programme Moldova in 
good times 2021-2025. Government’s long-term strategic vision of anchoring Moldova into the European 
integration process has been further spelled out  in the  new national development  strategy  ‘European 
Moldova  2030’  and  in  the  Government’s  Action  Plan  for  2021-2022.    While  deeply  impacted  by  the 
ongoing  Russian  aggression  against  Ukraine,  Moldova  continues  to  actively  support  refugees  fleeing 
Ukraine, hosting the highest number of refugees per capita among the neighbouring countries. Moldovan 
authorities have clearly condemned the Russian aggression and have aligned to the EU’s declarations and 
positions in the  international fora.  Russia’s use of energy as a weapon deepened the crisis adding an 
additional  challenge.  Nevertheless,  the  Moldovan  leadership  has  taken  immediate  steps  to  fulfil  the 
obligations towards international development partners. This has allowed them to successfully meet the 
conditions for disbursement of EU financial support in 2022. 

22 

 
 
 
 
 
 
Recent developments  

The Association Implementation Report will be published in January 2023 in advance of the EU-Moldova 
Association Council. The report expected to conclude that despite the lack of institutional capacity and 
human resources in public administration and a series of crises (the pandemic, the energy crisis, refugee 
inflows, and negative impact of Russia’s invasion of Ukraine on Moldova’s security, trade, and economic 
environment in general) Moldova is progressing on reforms in several key areas.  

There is strong commitment to advance on implementation of a comprehensive  justice reform with a 
comprehensive strategy for ensuring the independence and integrity of the justice sector for 2022-2025 
and a corresponding action plan entering into force in December 2021. The strategy envisages, inter alia, 
an extraordinary evaluation of judges and prosecutors, and a revision of assigned powers in investigating 
and prosecuting high-level corruption. On 23 September 2021, Parliament adopted the amendments to 
the  Constitution  aimed  at  strengthening  the  independence  of  the  judiciary  and  bringing  in  line  with 
European  standards  several  aspects  concerning  judges’  careers.  The  amendments  focus  on  the 
appointment of judges and the composition and selection process of the Superior Council of Magistracy. 
As  part  of  further  work  on  justice  reform,  the  authorities  continue  with  the  pre-vetting  of  the  new 
members of Superior Council of Magistracy and the Superior Council of Prosecutors, aimed at ensuring 
the  integrity  of  the  future  Council  members  and,  through  their  role  of  appointing  new  judges  and 
prosecutors and conducting disciplinary proceedings, of the overall judiciary system.  

With  a  score  of  36,  Moldova  ranked  105th  out  of  180  countries  in  the  Transparency  International 
Corruption  Perception  Index  in  2021,  improving  its  position  compared  to  2020  and  2019.  Moldova 
increased the annual budget of its anti-corruption institutions including the National Integrity Authority, 
the Criminal Asset Recovery Agency, and the Financial Investigation Unit. The implementation of the 2017-
2023 National Integrity and Anti-corruption Strategy continued. In May 2020, Moldova joined the peer 
review programme of the OECD Anti-corruption Network for Eastern Europe and Central Asia (ACN) – the 
Istanbul Anti-corruption Action Plan (IAP).  

Moldovan  government  continues  its  efforts  to  prevent  and  fight  corruption  and  has  announced  zero 
tolerance for corruption. It has taken decisive and rapid action in this regard. The evaluation of the work 
of the Prosecutor General resulted in a criminal investigation, and he was subsequently suspended from 
the office. New amendments to the law on prosecution were adopted by the Parliament in second reading 
on 6 October 2022 to implement Venice Commission’s recommendations. These amendments included 
clarification of the evaluation procedure for the Prosecutor General and the inclusion of the Prosecutor 
General in the Superior Council of Prosecutors. 

According to the 2021 report of the United Nations Interregional Crime and Justice Research Institute on 
illicit financial flows and asset recovery, Moldova has invested substantially in policy reform measures to 
combat  corruption,  organised  crime,  and  illicit  financial  flows.  However,  there  are  still  significant 
opportunities to strengthen and streamline capacity and results in the seizure and confiscation of assets 
linked to illicit activity. After seven years of proceedings in the investigation of the 2014 bank fraud, none 
of the major culprits are currently behind bars and the assets lost in the fraud have not been recovered. 

23 

 
 
Several new episodes of this case have been submitted by investigators to the court, including the case of 
former head of the National Bank Dorin Drăguţanu. However, the appeal case of fugitive oligarch Ilan Şor 
is still pending, despite certain progress during the last year, after the case was transmitted to the Appeal 
Court  of  Chisinau.  In  July  2022,  an  important  achievement  was  the  adoption  of  a  law  allowing  the 
establishment  of  a  mechanism  of  prosecution,  trial,  and  conviction  in  absentia  of  persons  evading 
prosecution. Also, in July 2022 Parliament approved amendments to the Criminal Code introducing an 
extended confiscation procedure expanding the legal possibilities to confiscate criminal assets. The new 
Government is committed to addressing this issue as a matter of priority. 

Concerning  electoral  standards  and  processes,  according  to  the  OSCE/ODIHR  assessment,  the  latest 
elections  were  well  administered,  competitive  and  fundamental  freedoms  were  largely  respected, 
although some shortcomings were also observed. The Central Electoral Commission composition has been 
renewed, observing a proportional representation of the Parliamentary majority and of the opposition on 
7  December  2022,  the  new  Electoral  code  was  adopted  in  the  Parliament,  following  the  inclusive 
consultation process. On 21 October, the Venice Commission gave  a positive opinion on the draft law, 
confirming that it takes account of previous recommendations by the Organisation for Security and Co-
operation in Europe/Office for Democratic Institutions and Human Rights (OSCE/ODIHR).  

 While Moldova’s ranking on the 2022 World Press Freedom Index (under new methodology) jumped by 
49 places from 89th in 2021 to 40th in 2022, media remains polarised and continues to reflect the interests 
of  political  and  economic  forces.    The  new  Audiovisual  Council  leadership  elected  in  December  2021 
monitors and sanctions media in a more objective and transparent manner, but its full efficiency has been 
hampered by insufficient human and technical capacity.  

On 2 June 2022, Parliament adopted amendments to the Audiovisual Code, reversing non-transparent 
legislation adopted on 16 December 2020 under the previous government. The amendments reintroduce 
limitations on the broadcasting of military and political content from countries that have not ratified the 
European  Convention  on  Transfrontier  Television  (including  Russia).  During  the  state  of  emergency 
declared on 24 February 2022, the Commission of Emergency Situation forbade retransmission of Russian 
military content.  

The legal framework for civil society is finally stable, and there is a perspective for good engagement of 
CSOs with authorities. The Government programme envisages increasing the transparency in decision-
making  by  reviewing the  legislative  framework on  access  to  information.  Consultations  with  the  CSOs 
should be done in a systematic way, with an emphasize on the quality and not speed of the process.   

EU-Moldova relations  

The EU and the Republic of Moldova have developed a close political and economic relationship over the 
years, leading to the conclusion of the Association Agreement, including the DCFTA (AA/DCFTA), which 
was signed on 27 June 2014 and entered fully into force on 1 July 2016.  

On  3  March  2022,  Moldova  submitted  its  application  for  EU  membership  in  line  with  its  government 
mandate to put Moldova ‘on the European path’. On 17 June 2022, the Commission presented its Opinion 

24 

 
 
on the application. In response, on 23 June 2022 the European Council recognised Moldova’s European 
perspective and granted it EU candidate country status. The Commission’s Opinion presented nine steps 
that Moldova needs to address to further progress on the enlargement path. The European Council has 
tasked the Commission with monitoring Moldova’s progress on the steps, and on alignment with all of the 
EU acquis, as part of the regular enlargement package in autumn 2023. Moldova swiftly developed an 
action  plan  for  implementation  of  the  nine  steps.  It  was  adopted  on  4  August  2022  by  the  newly 
established  National  Commission  for  European  Integration  let  by  the  President.  A  new  mechanism  to 
coordinate Moldova’s actions and positions in the EU integration process was set up, and steps were taken 
to strengthen institutional capacities.   

An  Association  Agenda  for  2021-2027,  setting  out  the  list  of  priorities  for  joint  work  as  well  as  for 
programming of EU financial support was adopted on 22 August 2022.  

The  6th  EU-Moldova  Association  Council  took  place  on  28  October  2021  and  the  7th  EU-Moldova 
Association Council meeting will take place on 7 February 2023.  

Since the beginning of the energy crisis in autumn 2021 and Russia’s war of aggression against Ukraine, 
the EU has stepped up its support for Moldova’s overall resilience. It has made available its entire toolbox 
of support measures, including macro-financial assistance, budget support, humanitarian aid, triggering 
the Union Civil Protection Mechanism and continuing bilateral and regional programmes. Additionally, to 
support Moldova in the  uncertain regional context, the  EU stepped up its cooperation and support to 
Moldova’s security and defence. 

Conclusions  

Moldova has a democratic political system based on the rule of law and the respect of human rights and 
is taking decisive steps to strengthen its democratic institutions and address the requirements of its newly 
acquired EU candidate country status. 

The  reform  commitment,  and  the  initial  steps  already  taken,  coupled  with  a  strong  political  will  and 
leadership to make further progress in key reform areas in a transparent manner and in line with European 
standards, are a positive sign. In this context, the political preconditions for a macro-financial assistance 
programme are considered fulfilled. 

25