Article 1 
1. The Union shall make macro-financial assistance of a maximum amount of EUR 150 000 000 available to Moldova (the ‘Union’s macro-financial assistance’), with a view to supporting Moldova’s economic stabilisation and substantive reform agenda. Of that maximum amount, up to EUR 120 000 000 shall be provided in the form of loans and up to EUR 30 000 000 in the form of grants. The release of the Union’s macro-financial assistance is subject to the approval of the Union budget for the relevant year by the European Parliament and the Council. The assistance shall contribute to covering Moldova’s balance-of-payments needs as identified in the IMF programme. 2. In order to finance the loan component of the Union’s macro-financial assistance, the Commission shall be empowered, on behalf of the Union, to borrow the necessary funds on the capital markets or from financial institutions and to on-lend them to Moldova. The loans shall have a maximum average maturity of 15 years. 3. The release of the Union’s macro-financial assistance shall be managed by the Commission in a manner consistent with the agreements or understandings reached between the IMF and Moldova, and with the key principles and objectives of economic reforms set out in the Association Agreement, including the DCFTA, agreed under the ENP. The Commission shall regularly inform the European Parliament and the Council of developments regarding the Union’s macro-financial assistance, including disbursements thereof, and shall provide those institutions with the relevant documents in due time. 4. The Union’s macro-financial assistance shall be made available for a period of two and a half years, starting on the first day after the entry into force of the MOU referred to in Article 3(1). 5. If the financing needs of Moldova decrease fundamentally during the period of the disbursement of the Union’s macro-financial assistance compared to the initial projections, the Commission, acting in accordance with the examination procedure referred to in Article 7(2), shall reduce the amount of the assistance or suspend or cancel it.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal In 2022, the global economic situation deteriorated. The circumstances underlying Moldova’s first request for macro-financial assistance (MFA), made in 2022, further worsened. Moldova is both directly and indirectly affected by Russia’s war of aggression against Ukraine, which came on top of the energy crisis it has faced since October 2021. Moreover, since the start of the war, over half a million people have crossed the Moldovan border, and about 90 000 remain in the country. This has put additional pressure on Moldova’s public finances. Therefore, the overall macroeconomic position weakened significantly in 2022. Following a marked post-pandemic recovery in 2021, growth in the first 9 months of 2022 plummeted and the country entered a deep recession. With limited buffers to mitigate the crisis, Moldova requested further assistance from international partners. This suggested MFA increase thus comes as part of larger EU and international assistance for Moldova. The ongoing MFA operation was requested by Moldova on 19 November 2021. The MFA, amounting to EUR 150 million (in loans on concessional terms and grants), was adopted by the European Parliament and the Council on 6 April 2022 and entered into force on 18 July 2022. Following fulfilment of the policy conditions attached to it, the first disbursement was made on 1 August 2022. Under this ongoing operation, EUR 100 million (in loans on concessional terms and grants) remains available to Moldova until January 2025. The second disbursement is expected in the first quarter of 2023. In line with regular MFA procedures, the operation was made available to Moldova in combination with a new International Monetary Fund (IMF) arrangement, which was adopted in December 2021 and expanded in May 2022. The expanded support by the IMF under the Extended Credit Facility / Extended Fund Facility (ECF/EFF) programme amounts to USD 795 million. Notwithstanding the current assistance to Moldova, the ongoing energy crisis and the effects of the war in Ukraine continue to pose sizeable challenges. According to the IMF’s latest estimates (December 2022), Moldova’s overall external financing gap for 2023 has increased by EUR 430 million (around 3% of gross domestic product (GDP)) compared to the IMF’s first programme review (September 2022). This translates to an overall financing gap of about EUR 803 million (5% of GDP) for 2023. Against this backdrop and in line with the principle of fair burden-sharing, the Commission submits to the Parliament and the Council a proposal to increase the ongoing MFA to Moldova by EUR 145 million, of which EUR 100 million in loans and EUR 45 million in grants. The additional MFA assistance would be disbursed in two new instalments, linked to: (i) additional policy conditionality; (ii) good progress in implementing the Association Agreement and the Deep and Comprehensive Free Trade Area (DCFTA); and (iii) a positive track record in implementing the IMF programme. The policy conditions attached to the two new instalments would build on those agreed in the Memorandum of Understanding on the current MFA. This would strengthen the focus of the programme and ensure consistency with the EU-Moldova policy priorities and the Moldovan government agenda. The additional support is also in line with the strengthened EU-Moldova relationship under the candidate country status, which Moldova was granted on 23 June 2022. The implementation of the proposed operation is expected to go hand in hand with additional EU support under budgetary operations financed by the Neighbourhood, Development and International Cooperation Instrument (NDICI). As further detailed in the Commission staff working document accompanying this proposal, the Commission has taken account of the assessment of the political situation made by the European External Action Service, and considers that the political and economic preconditions for the proposed MFA operation are satisfied. General context Russia’s invasion of Ukraine had a strong negative impact on the Moldovan economy amid an increasingly challenging global context. In January-September 2022, the Moldovan economy contracted by 4%, 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 a drought in the summer of 2022. The energy crisis, which intensified in 2022, has put additional pressure on Moldova’s public finances. The sharp rise in energy prices fuelled the high inflation and triggered the need for further spending on subsidies for the most vulnerable consumers. In 2023, Moldova’s outlook remains bleak. It is set to be further impacted by Russia’s intensifying attacks on Ukraine and by the economic slowdown across the EU (Moldova’s key trading partner). According to an IMF forecast (November 2022), in 2023, growth is set to pick up only moderately, to 1.5%, and to go back to its pre-crisis levels only in 2024-2025. In 2023, inflation is set to go down markedly, but to remain in the double digits, averaging at 13.7%, compared to 28.5% in 2022. The spike in energy and food prices drove the high inflation in 2022, which peaked at 34% in October. In response to the strong inflationary pressure, the central bank hiked the key interest rate three times last year (by a cumulative 9 percentage points), to 21.5%. By the end of the 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 will be due to higher spending on the most vulnerable consumers as a result of the spike in energy tariffs, and some public salary increases deemed necessary given the soaring inflation. Moldova’s public debt-to-GDP ratio is low compared to most of its regional peers, but it is set to increase to 38% in 2023, against 36% of GDP at the end of 2022. About 95% of Moldova’s public external debt was extended by multilateral creditors on concessional terms. Nevertheless, due to the country’s high sensitivity to external shocks, the IMF has revised its rating of Moldova’s risk of debt distress from low to medium. On the external side, the current account deficit remains high, at 13.7% of GDP in the third quarter of 2022, and is set to remain at comparable levels in 2023, at 11.8% of GDP. This is driven largely by a large negative trade balance, at about 32% of GDP in the third quarter of 2022. 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. Net foreign direct investment showed some resilience in the first half of 2022 (largely due to companies’ high reinvested earnings). However, due to the uncertainty caused by the war, an IMF forecast (November 2022) expects it to decrease sharply, down to 0.4% of GDP for 2022 overall. Since the start of Russia’s invasion of Ukraine, Moldova’s foreign currency reserves have been highly volatile, which has prompted sizeable 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 reserve levels were restored by the end of 2022, risks remain on the downside, related largely to the ongoing war in Ukraine. The central bank projects a drop in reserves at the start of 2023, partly due to a mild economic recovery and higher import demand, and additional fluctuations in the foreign exchange market. 
Revised version (Article 1 ):
1. The Union shall make macro-financial assistance of a maximum amount of EUR 295 000 000 available to Moldova (the ‘Union’s macro-financial assistance’), with a view to supporting Moldova’s economic stabilisation and substantive reform agenda. Of that maximum amount, up to EUR 220 000 000 shall be provided in the form of loans and up to EUR 75 000 000 in the form of grants. The release of the Union’s macro-financial assistance is subject to the adoption of the Union budget for the relevant year by the European Parliament and the Council. The assistance shall contribute to covering Moldova’s balance-of-payments needs as identified in the IMF programme. 2. In order to finance the loan component of the Union’s macro-financial assistance, the Commission shall be empowered, on behalf of the Union, to borrow the necessary funds on the capital markets or from financial institutions and to on-lend them to Moldova. The loans shall have a maximum average maturity of 15 years. 3. The release of the Union’s macro-financial assistance shall be managed by the Commission in a manner consistent with the agreements or understandings reached between the IMF and Moldova, and with the key principles and objectives of economic reforms set out in the Association Agreement, including the DCFTA, agreed under the ENP. The Commission shall regularly inform the European Parliament and the Council of developments regarding the Union’s macro-financial assistance, including disbursements thereof, and shall provide those institutions with the relevant documents in due time. 4. The Union’s macro-financial assistance shall be made available for a period of two and a half years, starting on the first day after the entry into force of the MOU referred to in Article 3(1). 5. If the financing needs of Moldova decrease fundamentally during the period of the disbursement of the Union’s macro-financial assistance compared to the initial projections, the Commission, acting in accordance with the examination procedure referred to in Article 7(2), shall reduce the amount of the assistance or suspend or cancel it.
Article 2 
1. A precondition for granting the Union’s macro-financial assistance shall be that Moldova respects effective democratic mechanisms, including a multi-party parliamentary system, and the rule of law, and guarantees respect for human rights. 2. The Commission and the EEAS shall monitor the fulfilment of the precondition set out in paragraph 1 throughout the life-cycle of the Union’s macro-financial assistance. 3. Paragraphs 1 and 2 of this Article shall apply in accordance with Council Decision 2010/427/EU ( 6 ) .
Article 3 
1. The Commission, in accordance with the examination procedure referred to in Article 7(2), shall agree with the Moldovan authorities on clearly defined economic policy and financial conditions, focusing on structural reforms and sound public finances, to which the Union’s macro-financial assistance is to be subject. Those economic policy and financial conditions shall be set out in a MOU which shall include a timeframe for the fulfilment of those conditions. Those economic policy and financial conditions shall be consistent with the agreements or understandings referred to in Article 1(3), including the macroeconomic adjustment and structural reform programmes implemented by Moldova with the support of the IMF. 2. The conditions referred to in paragraph 1 shall aim, in particular, to enhance the efficiency, transparency and accountability of the public finance management systems in Moldova, including for the use of the Union’s macro-financial assistance. Progress in mutual market opening, the development of rule-based and fair trade, and other priorities in the context of the Union’s external policy shall also be duly taken into account when designing the policy measures. The Commission shall regularly monitor progress in attaining those objectives. 3. The detailed financial terms of the Union’s macro-financial assistance shall be laid down in a loan agreement and a grant agreement to be concluded between the Commission and Moldova. 4. The Commission shall verify, at regular intervals, that the conditions referred to in Article 4(3) continue to be met, including whether the economic policies of Moldova are in accordance with the objectives of the Union’s macro-financial assistance. For the purposes of that verification, the Commission shall coordinate closely with the IMF and the World Bank, and, where necessary, with the European Parliament and with the Council.
Article 4 
1. Subject to the conditions referred to in paragraph 3, the Union’s macro-financial assistance shall be made available by the Commission in three instalments, each of which shall consist of a loan and a grant element. The size of each instalment shall be laid down in the MOU. 2. The amounts of the Union’s macro-financial assistance provided in the form of loans shall be provisioned, where required, in accordance with Regulation (EU) 2021/947. 3. The Commission shall decide on the release of the instalments subject to the fulfilment of all of the following conditions: (a) the precondition set out in Article 2(1); (b) a continuous satisfactory track record of implementing a policy programme that contains strong adjustment and structural reform measures supported by a non-precautionary IMF credit arrangement; (c) the satisfactory implementation of the economic policy and financial conditions agreed in the MOU. 4. The release of the second instalment shall not, in principle, take place earlier than 3 months after the release of the first instalment. The release of the third instalment shall not, in principle, take place earlier than 3 months after the release of the second instalment. 5. Where the conditions referred to in paragraph 3 are not met, the Commission shall temporarily suspend or cancel the disbursement of the Union’s macro-financial assistance. In such cases, it shall inform the European Parliament and the Council of the reasons for the suspension or cancellation. 6. The Union’s macro-financial assistance shall be disbursed to the National Bank of Moldova. Subject to the agreed provisions set out in the MOU, including a confirmation of residual budgetary financing needs, the Union funds may be transferred to the Moldovan Ministry of Finance as the final beneficiary.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal In 2022, the global economic situation deteriorated. The circumstances underlying Moldova’s first request for macro-financial assistance (MFA), made in 2022, further worsened. Moldova is both directly and indirectly affected by Russia’s war of aggression against Ukraine, which came on top of the energy crisis it has faced since October 2021. Moreover, since the start of the war, over half a million people have crossed the Moldovan border, and about 90 000 remain in the country. This has put additional pressure on Moldova’s public finances. Therefore, the overall macroeconomic position weakened significantly in 2022. Following a marked post-pandemic recovery in 2021, growth in the first 9 months of 2022 plummeted and the country entered a deep recession. With limited buffers to mitigate the crisis, Moldova requested further assistance from international partners. This suggested MFA increase thus comes as part of larger EU and international assistance for Moldova. The ongoing MFA operation was requested by Moldova on 19 November 2021. The MFA, amounting to EUR 150 million (in loans on concessional terms and grants), was adopted by the European Parliament and the Council on 6 April 2022 and entered into force on 18 July 2022. Following fulfilment of the policy conditions attached to it, the first disbursement was made on 1 August 2022. Under this ongoing operation, EUR 100 million (in loans on concessional terms and grants) remains available to Moldova until January 2025. The second disbursement is expected in the first quarter of 2023. In line with regular MFA procedures, the operation was made available to Moldova in combination with a new International Monetary Fund (IMF) arrangement, which was adopted in December 2021 and expanded in May 2022. The expanded support by the IMF under the Extended Credit Facility / Extended Fund Facility (ECF/EFF) programme amounts to USD 795 million. Notwithstanding the current assistance to Moldova, the ongoing energy crisis and the effects of the war in Ukraine continue to pose sizeable challenges. According to the IMF’s latest estimates (December 2022), Moldova’s overall external financing gap for 2023 has increased by EUR 430 million (around 3% of gross domestic product (GDP)) compared to the IMF’s first programme review (September 2022). This translates to an overall financing gap of about EUR 803 million (5% of GDP) for 2023. Against this backdrop and in line with the principle of fair burden-sharing, the Commission submits to the Parliament and the Council a proposal to increase the ongoing MFA to Moldova by EUR 145 million, of which EUR 100 million in loans and EUR 45 million in grants. The additional MFA assistance would be disbursed in two new instalments, linked to: (i) additional policy conditionality; (ii) good progress in implementing the Association Agreement and the Deep and Comprehensive Free Trade Area (DCFTA); and (iii) a positive track record in implementing the IMF programme. The policy conditions attached to the two new instalments would build on those agreed in the Memorandum of Understanding on the current MFA. This would strengthen the focus of the programme and ensure consistency with the EU-Moldova policy priorities and the Moldovan government agenda. The additional support is also in line with the strengthened EU-Moldova relationship under the candidate country status, which Moldova was granted on 23 June 2022. The implementation of the proposed operation is expected to go hand in hand with additional EU support under budgetary operations financed by the Neighbourhood, Development and International Cooperation Instrument (NDICI). As further detailed in the Commission staff working document accompanying this proposal, the Commission has taken account of the assessment of the political situation made by the European External Action Service, and considers that the political and economic preconditions for the proposed MFA operation are satisfied. General context Russia’s invasion of Ukraine had a strong negative impact on the Moldovan economy amid an increasingly challenging global context. In January-September 2022, the Moldovan economy contracted by 4%, 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 a drought in the summer of 2022. The energy crisis, which intensified in 2022, has put additional pressure on Moldova’s public finances. The sharp rise in energy prices fuelled the high inflation and triggered the need for further spending on subsidies for the most vulnerable consumers. In 2023, Moldova’s outlook remains bleak. It is set to be further impacted by Russia’s intensifying attacks on Ukraine and by the economic slowdown across the EU (Moldova’s key trading partner). According to an IMF forecast (November 2022), in 2023, growth is set to pick up only moderately, to 1.5%, and to go back to its pre-crisis levels only in 2024-2025. In 2023, inflation is set to go down markedly, but to remain in the double digits, averaging at 13.7%, compared to 28.5% in 2022. The spike in energy and food prices drove the high inflation in 2022, which peaked at 34% in October. In response to the strong inflationary pressure, the central bank hiked the key interest rate three times last year (by a cumulative 9 percentage points), to 21.5%. By the end of the 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 will be due to higher spending on the most vulnerable consumers as a result of the spike in energy tariffs, and some public salary increases deemed necessary given the soaring inflation. Moldova’s public debt-to-GDP ratio is low compared to most of its regional peers, but it is set to increase to 38% in 2023, against 36% of GDP at the end of 2022. About 95% of Moldova’s public external debt was extended by multilateral creditors on concessional terms. Nevertheless, due to the country’s high sensitivity to external shocks, the IMF has revised its rating of Moldova’s risk of debt distress from low to medium. On the external side, the current account deficit remains high, at 13.7% of GDP in the third quarter of 2022, and is set to remain at comparable levels in 2023, at 11.8% of GDP. This is driven largely by a large negative trade balance, at about 32% of GDP in the third quarter of 2022. 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. Net foreign direct investment showed some resilience in the first half of 2022 (largely due to companies’ high reinvested earnings). However, due to the uncertainty caused by the war, an IMF forecast (November 2022) expects it to decrease sharply, down to 0.4% of GDP for 2022 overall. Since the start of Russia’s invasion of Ukraine, Moldova’s foreign currency reserves have been highly volatile, which has prompted sizeable 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 reserve levels were restored by the end of 2022, risks remain on the downside, related largely to the ongoing war in Ukraine. The central bank projects a drop in reserves at the start of 2023, partly due to a mild economic recovery and higher import demand, and additional fluctuations in the foreign exchange market. 
Revised version (Article 4 ):
1. Subject to the conditions referred to in paragraph 3, the Union’s macro-financial assistance shall be made available by the Commission in five instalments, each of which shall consist of a loan and a grant element. The size of each instalment shall be laid down in the MOU which shall be amended for that purpose. 2. The amounts of the Union’s macro-financial assistance provided in the form of loans shall be provisioned, where required, in accordance with Regulation (EU) 2021/947. 4. The release of the second instalment shall, in principle, take place at the earliest three months after the release of the first instalment. The release of the third instalment shall, in principle, take place at the earliest three months after the release of the second instalment. The release of the fourth instalment shall, in principle, take place at the earliest three months after the release of the third instalment. The release of the fifth instalment shall, in principle, take place at the earliest three months after the release of the fourth instalment. 5. Where the conditions referred to in paragraph 3 are not met, the Commission shall temporarily suspend or cancel the disbursement of the Union’s macro-financial assistance. In such cases, it shall inform the European Parliament and the Council of the reasons for the suspension or cancellation. 6. The Union’s macro-financial assistance shall be disbursed to the National Bank of Moldova. Subject to the agreed provisions set out in the MOU, including a confirmation of residual budgetary financing needs, the Union funds may be transferred to the Moldovan Ministry of Finance as the final beneficiary.
Article 5 
1. The borrowing and lending operations related to the loan component of the Union’s macro-financial assistance shall be carried out in euro using the same value date and shall not involve the Union in the transformation of maturities, or expose the Union to any exchange or interest rate risk, or to any other commercial risk. 2. Where the circumstances permit, and if Moldova so requests, the Commission may take the steps necessary to ensure that an early repayment clause is included in the loan terms and conditions and that it is matched by a corresponding clause in the terms and conditions of the borrowing operations. 3. Where circumstances permit an improvement of the interest rate of the loan and if Moldova so requests, the Commission may decide to refinance all or part of its initial borrowings or may restructure the corresponding financial conditions. Refinancing or restructuring operations shall be carried out in accordance with paragraphs 1 and 4 and shall not have the effect of extending the maturity of the borrowings concerned or of increasing the amount of capital outstanding at the date of the refinancing or restructuring. 4. All costs incurred by the Union which relate to the borrowing and lending operations under this Decision shall be borne by Moldova. 5. The Commission shall inform the European Parliament and the Council of developments in the operations referred to in paragraphs 2 and 3.
Article 6 
1. The Union’s macro-financial assistance shall be implemented in accordance with Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council ( 7 ) . 2. The Union’s macro-financial assistance shall be implemented under direct management. 3. The loan agreement and the grant agreement to be agreed with the Moldovan authorities shall contain all of the following provisions: (a) ensuring that Moldova regularly checks that financing provided from the general budget of the Union has been properly used, takes appropriate measures to prevent irregularities and fraud and, where necessary, takes legal action to recover any funds provided under this Decision that have been misappropriated; (b) ensuring the protection of the Union’s financial interests, in particular providing for specific measures in relation to the prevention of, and fight against, fraud, corruption and any other irregularities affecting the Union’s macro-financial assistance, in accordance with Council Regulations (EC, Euratom) No 2988/95 ( 8 ) and (Euratom, EC) No 2185/96 ( 9 ) , Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council ( 10 ) and, for those Member States participating in enhanced cooperation regarding the European Public Prosecutor’s Office, also in accordance with Council Regulation (EU) 2017/1939 ( 11 ) ; (c) expressly authorising the European Anti-Fraud Office to carry out investigations, including on-the-spot checks and inspections including digital forensic operations and interviews; (d) expressly authorising the Commission, or its representatives, to carry out checks, including on-the-spot checks and inspections; (e) expressly authorising the Commission and the Court of Auditors to perform audits during and after the availability period of the Union’s macro-financial assistance, including document audits and on-the-spot audits, such as operational assessments; (f) ensuring that the Union is entitled to early repayment of the loan or to full repayment of the grant where it has been established that, in relation to the management of the Union’s macro-financial assistance, Moldova has engaged in any act of fraud or corruption or any other illegal activity detrimental to the financial interests of the Union; (g) ensuring that all costs incurred by the Union that relate to the borrowing and lending operations under this Decisions are to be borne by Moldova. 4. Before the implementation of the Union’s macro-financial assistance, the Commission shall assess, by means of an operational assessment, the soundness of Moldova’s financial arrangements, administrative procedures and internal and external control mechanisms which are relevant to the assistance.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal In 2022, the global economic situation deteriorated. The circumstances underlying Moldova’s first request for macro-financial assistance (MFA), made in 2022, further worsened. Moldova is both directly and indirectly affected by Russia’s war of aggression against Ukraine, which came on top of the energy crisis it has faced since October 2021. Moreover, since the start of the war, over half a million people have crossed the Moldovan border, and about 90 000 remain in the country. This has put additional pressure on Moldova’s public finances. Therefore, the overall macroeconomic position weakened significantly in 2022. Following a marked post-pandemic recovery in 2021, growth in the first 9 months of 2022 plummeted and the country entered a deep recession. With limited buffers to mitigate the crisis, Moldova requested further assistance from international partners. This suggested MFA increase thus comes as part of larger EU and international assistance for Moldova. The ongoing MFA operation was requested by Moldova on 19 November 2021. The MFA, amounting to EUR 150 million (in loans on concessional terms and grants), was adopted by the European Parliament and the Council on 6 April 2022 and entered into force on 18 July 2022. Following fulfilment of the policy conditions attached to it, the first disbursement was made on 1 August 2022. Under this ongoing operation, EUR 100 million (in loans on concessional terms and grants) remains available to Moldova until January 2025. The second disbursement is expected in the first quarter of 2023. In line with regular MFA procedures, the operation was made available to Moldova in combination with a new International Monetary Fund (IMF) arrangement, which was adopted in December 2021 and expanded in May 2022. The expanded support by the IMF under the Extended Credit Facility / Extended Fund Facility (ECF/EFF) programme amounts to USD 795 million. Notwithstanding the current assistance to Moldova, the ongoing energy crisis and the effects of the war in Ukraine continue to pose sizeable challenges. According to the IMF’s latest estimates (December 2022), Moldova’s overall external financing gap for 2023 has increased by EUR 430 million (around 3% of gross domestic product (GDP)) compared to the IMF’s first programme review (September 2022). This translates to an overall financing gap of about EUR 803 million (5% of GDP) for 2023. Against this backdrop and in line with the principle of fair burden-sharing, the Commission submits to the Parliament and the Council a proposal to increase the ongoing MFA to Moldova by EUR 145 million, of which EUR 100 million in loans and EUR 45 million in grants. The additional MFA assistance would be disbursed in two new instalments, linked to: (i) additional policy conditionality; (ii) good progress in implementing the Association Agreement and the Deep and Comprehensive Free Trade Area (DCFTA); and (iii) a positive track record in implementing the IMF programme. The policy conditions attached to the two new instalments would build on those agreed in the Memorandum of Understanding on the current MFA. This would strengthen the focus of the programme and ensure consistency with the EU-Moldova policy priorities and the Moldovan government agenda. The additional support is also in line with the strengthened EU-Moldova relationship under the candidate country status, which Moldova was granted on 23 June 2022. The implementation of the proposed operation is expected to go hand in hand with additional EU support under budgetary operations financed by the Neighbourhood, Development and International Cooperation Instrument (NDICI). As further detailed in the Commission staff working document accompanying this proposal, the Commission has taken account of the assessment of the political situation made by the European External Action Service, and considers that the political and economic preconditions for the proposed MFA operation are satisfied. General context Russia’s invasion of Ukraine had a strong negative impact on the Moldovan economy amid an increasingly challenging global context. In January-September 2022, the Moldovan economy contracted by 4%, 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 a drought in the summer of 2022. The energy crisis, which intensified in 2022, has put additional pressure on Moldova’s public finances. The sharp rise in energy prices fuelled the high inflation and triggered the need for further spending on subsidies for the most vulnerable consumers. In 2023, Moldova’s outlook remains bleak. It is set to be further impacted by Russia’s intensifying attacks on Ukraine and by the economic slowdown across the EU (Moldova’s key trading partner). According to an IMF forecast (November 2022), in 2023, growth is set to pick up only moderately, to 1.5%, and to go back to its pre-crisis levels only in 2024-2025. In 2023, inflation is set to go down markedly, but to remain in the double digits, averaging at 13.7%, compared to 28.5% in 2022. The spike in energy and food prices drove the high inflation in 2022, which peaked at 34% in October. In response to the strong inflationary pressure, the central bank hiked the key interest rate three times last year (by a cumulative 9 percentage points), to 21.5%. By the end of the 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 will be due to higher spending on the most vulnerable consumers as a result of the spike in energy tariffs, and some public salary increases deemed necessary given the soaring inflation. Moldova’s public debt-to-GDP ratio is low compared to most of its regional peers, but it is set to increase to 38% in 2023, against 36% of GDP at the end of 2022. About 95% of Moldova’s public external debt was extended by multilateral creditors on concessional terms. Nevertheless, due to the country’s high sensitivity to external shocks, the IMF has revised its rating of Moldova’s risk of debt distress from low to medium. On the external side, the current account deficit remains high, at 13.7% of GDP in the third quarter of 2022, and is set to remain at comparable levels in 2023, at 11.8% of GDP. This is driven largely by a large negative trade balance, at about 32% of GDP in the third quarter of 2022. 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. Net foreign direct investment showed some resilience in the first half of 2022 (largely due to companies’ high reinvested earnings). However, due to the uncertainty caused by the war, an IMF forecast (November 2022) expects it to decrease sharply, down to 0.4% of GDP for 2022 overall. Since the start of Russia’s invasion of Ukraine, Moldova’s foreign currency reserves have been highly volatile, which has prompted sizeable 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 reserve levels were restored by the end of 2022, risks remain on the downside, related largely to the ongoing war in Ukraine. The central bank projects a drop in reserves at the start of 2023, partly due to a mild economic recovery and higher import demand, and additional fluctuations in the foreign exchange market. 
Revised version (Article 6 ):
1. The Union’s macro-financial assistance shall be implemented in accordance with Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council ( 2 ). 2. The Union’s macro-financial assistance shall be implemented under direct management. 4. Before the implementation of the Union’s macro-financial assistance, the Commission shall assess, by means of an operational assessment, the soundness of Moldova’s financial arrangements, administrative procedures and internal and external control mechanisms which are relevant to the assistance.
Article 7 
1. The Commission shall be assisted by a committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011. 2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.
Article 8 
1. By 30 June of each year, the Commission shall submit to the European Parliament and to the Council a report on the implementation of this Decision in the preceding year, including an evaluation of that implementation. That report shall: (a) examine progress made in implementing the Union’s macro-financial assistance; (b) assess the economic situation and prospects of Moldova, as well as progress made in implementing the policy measures referred to in Article 3(1); (c) indicate the connection between the economic policy conditions set out in the MOU, Moldova’s on-going economic and fiscal performance and the Commission’s decisions to release the instalments of the Union’s macro-financial assistance. 2. Not later than 2 years after the expiry of the availability period referred to in Article 1(4), the Commission shall submit to the European Parliament and to the Council an ex-post evaluation report, assessing the results and efficiency of the completed Union’s macro-financial assistance and the extent to which it has contributed to the aims of the assistance.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal In 2022, the global economic situation deteriorated. The circumstances underlying Moldova’s first request for macro-financial assistance (MFA), made in 2022, further worsened. Moldova is both directly and indirectly affected by Russia’s war of aggression against Ukraine, which came on top of the energy crisis it has faced since October 2021. Moreover, since the start of the war, over half a million people have crossed the Moldovan border, and about 90 000 remain in the country. This has put additional pressure on Moldova’s public finances. Therefore, the overall macroeconomic position weakened significantly in 2022. Following a marked post-pandemic recovery in 2021, growth in the first 9 months of 2022 plummeted and the country entered a deep recession. With limited buffers to mitigate the crisis, Moldova requested further assistance from international partners. This suggested MFA increase thus comes as part of larger EU and international assistance for Moldova. The ongoing MFA operation was requested by Moldova on 19 November 2021. The MFA, amounting to EUR 150 million (in loans on concessional terms and grants), was adopted by the European Parliament and the Council on 6 April 2022 and entered into force on 18 July 2022. Following fulfilment of the policy conditions attached to it, the first disbursement was made on 1 August 2022. Under this ongoing operation, EUR 100 million (in loans on concessional terms and grants) remains available to Moldova until January 2025. The second disbursement is expected in the first quarter of 2023. In line with regular MFA procedures, the operation was made available to Moldova in combination with a new International Monetary Fund (IMF) arrangement, which was adopted in December 2021 and expanded in May 2022. The expanded support by the IMF under the Extended Credit Facility / Extended Fund Facility (ECF/EFF) programme amounts to USD 795 million. Notwithstanding the current assistance to Moldova, the ongoing energy crisis and the effects of the war in Ukraine continue to pose sizeable challenges. According to the IMF’s latest estimates (December 2022), Moldova’s overall external financing gap for 2023 has increased by EUR 430 million (around 3% of gross domestic product (GDP)) compared to the IMF’s first programme review (September 2022). This translates to an overall financing gap of about EUR 803 million (5% of GDP) for 2023. Against this backdrop and in line with the principle of fair burden-sharing, the Commission submits to the Parliament and the Council a proposal to increase the ongoing MFA to Moldova by EUR 145 million, of which EUR 100 million in loans and EUR 45 million in grants. The additional MFA assistance would be disbursed in two new instalments, linked to: (i) additional policy conditionality; (ii) good progress in implementing the Association Agreement and the Deep and Comprehensive Free Trade Area (DCFTA); and (iii) a positive track record in implementing the IMF programme. The policy conditions attached to the two new instalments would build on those agreed in the Memorandum of Understanding on the current MFA. This would strengthen the focus of the programme and ensure consistency with the EU-Moldova policy priorities and the Moldovan government agenda. The additional support is also in line with the strengthened EU-Moldova relationship under the candidate country status, which Moldova was granted on 23 June 2022. The implementation of the proposed operation is expected to go hand in hand with additional EU support under budgetary operations financed by the Neighbourhood, Development and International Cooperation Instrument (NDICI). As further detailed in the Commission staff working document accompanying this proposal, the Commission has taken account of the assessment of the political situation made by the European External Action Service, and considers that the political and economic preconditions for the proposed MFA operation are satisfied. General context Russia’s invasion of Ukraine had a strong negative impact on the Moldovan economy amid an increasingly challenging global context. In January-September 2022, the Moldovan economy contracted by 4%, 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 a drought in the summer of 2022. The energy crisis, which intensified in 2022, has put additional pressure on Moldova’s public finances. The sharp rise in energy prices fuelled the high inflation and triggered the need for further spending on subsidies for the most vulnerable consumers. In 2023, Moldova’s outlook remains bleak. It is set to be further impacted by Russia’s intensifying attacks on Ukraine and by the economic slowdown across the EU (Moldova’s key trading partner). According to an IMF forecast (November 2022), in 2023, growth is set to pick up only moderately, to 1.5%, and to go back to its pre-crisis levels only in 2024-2025. In 2023, inflation is set to go down markedly, but to remain in the double digits, averaging at 13.7%, compared to 28.5% in 2022. The spike in energy and food prices drove the high inflation in 2022, which peaked at 34% in October. In response to the strong inflationary pressure, the central bank hiked the key interest rate three times last year (by a cumulative 9 percentage points), to 21.5%. By the end of the 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 will be due to higher spending on the most vulnerable consumers as a result of the spike in energy tariffs, and some public salary increases deemed necessary given the soaring inflation. Moldova’s public debt-to-GDP ratio is low compared to most of its regional peers, but it is set to increase to 38% in 2023, against 36% of GDP at the end of 2022. About 95% of Moldova’s public external debt was extended by multilateral creditors on concessional terms. Nevertheless, due to the country’s high sensitivity to external shocks, the IMF has revised its rating of Moldova’s risk of debt distress from low to medium. On the external side, the current account deficit remains high, at 13.7% of GDP in the third quarter of 2022, and is set to remain at comparable levels in 2023, at 11.8% of GDP. This is driven largely by a large negative trade balance, at about 32% of GDP in the third quarter of 2022. 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. Net foreign direct investment showed some resilience in the first half of 2022 (largely due to companies’ high reinvested earnings). However, due to the uncertainty caused by the war, an IMF forecast (November 2022) expects it to decrease sharply, down to 0.4% of GDP for 2022 overall. Since the start of Russia’s invasion of Ukraine, Moldova’s foreign currency reserves have been highly volatile, which has prompted sizeable 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 reserve levels were restored by the end of 2022, risks remain on the downside, related largely to the ongoing war in Ukraine. The central bank projects a drop in reserves at the start of 2023, partly due to a mild economic recovery and higher import demand, and additional fluctuations in the foreign exchange market. 
Revised version (Article 8 ):
2. Not later than 2 years after the expiry of the availability period referred to in Article 1(4), the Commission shall submit to the European Parliament and to the Council an ex-post evaluation report, assessing the results and efficiency of the completed Union’s macro-financial assistance and the extent to which it has contributed to the aims of the assistance.
Article 9 
This Decision shall enter into force on the third day following that of its publication in the Official Journal of the European Union .