Moldova: Moving To A Market Economy (world Bank Country Study)

'This report is based on the findings of an October 1992 mission led by Costas Michalopoulos and of subsequent missions led by Jonathan Walters'--P. v.

this Report On The Country Of Moldova Consists Of: 1) An Outline Of The Development And Structure Of The Moldovian Economy Up To 1990 And The Nature Of The Shocks That Occurred In 1991 And 1992 And Their Consequences For Output, Incomes, And Macro-stability; 2) A Discussion Of The Government ' S Reform Program And Its Response To The Need For Structural Transformation; And 3) Recommendations For Reform And Essential Actions For Restoring Income. In The Command Economy Of The Ussr, Moldova ' S Economic Role Was One Of Producer Of Raw Processed Foodstuffs. In 1990, Moldova Had A Trade-dependent Economy, With The Shares Of Imports And Exports In Gross Domestic Product Averaging 50 Percent. From 1991 On, Moldova Has Been Hit By A Series Of Shocks Both Internal And External. Internally, Crop Production Was Greatly Reduced By A Series Of Freezes And Droughts Between 1991 And 1992. Externally, The Conflict In June 1992 Over The Status Of The Transnistria Caused Great Economic Losses. Consequently, Prices Have Been Raised Many Times Over Since 1990 And Trade Has Been Declining. Fiscal Policy Is The Macroeconomic Instrument Over Which The Government Currently Has Most Leverage, But Poor Revenue Yields Compromise The Macroeconomic Stability Of The Country. The Authorities ' Objective Is To Halt The Output Fall Of The Last Two Years, While Bringing Inflation Under Control And Enabling A Re-orientation Of Production To The New Structure Of Relative Prices. In Order To Stabilize The Economy, The Authorities Will Need To Improve Fiscal Programming And Control, Develop Instruments Of Monetary Policy, And Build An Effective Financial Sector And Payments System To Combat The Macroeconomic Instabilityarising Out Of Weak Financial Institutions And Inadequate Prudential Supervision. These Reforms Will Underpin The Introduction Of The New Moldovian Currency And A Significant Tightening Of Monetary Policy At That Stage.

Annotation Identifies the top priorities in Moldova's reform agenda as it attempts to halt an evolving economic crisis and succeed in its transition to a market economy. Moldova's trade-dependent economy has been hit by a series of internal and external shocks over the past few years: a freeze followed by floods in 1991, a severe drought in 1992, and, in that same year, a violent conflict over the status of the Transnistria region which destroyed some infrastructure, fuel pipelines, and industrial plants. These events have forced the country's economy to try to adjust to the resulting decline in trade and make far-reaching structural changes. This volume stresses that Moldova needs less adjustment in its sectoral composition of output and exports and more adjustment within each sector. The government's objective is to halt the output decline of the last two years while bringing inflation under control and reorienting production to a new pricing structure. Reforms at the macroeconomic level will underpin Moldova's sustainable growth and safeguard the welfare of the most vulnerable in the population