The government of Moldova is running out of cash and has limited payments to public sector salaries, pensions, and utility bills. All other expenditures ranging from repairs to purchase of goods and services is suspended.
The new government is hoping to resume an IMF program suspended last year amidst political instability. At the moment, a much anticipated €150 million from Romania has been suspended, as well as all EU funding.
The IMF was visiting Moldova recently to update its data in the economic state of affairs. Whether and under what conditions the program can resume is unknown.
The collapse of the Moldovan economy is the most politically embarrassing story that the EU has faced in the East Partnership.
Moldova is one of the three states that signed an Association Agreement with the European Union in 2014 and was regarded its star pupil in terms of reforms. Moldova was the first among the six Eastern Partnership states to be granted Visa free travel in the EU. Then, towards the end of 2014, the small country of 3,5 million people was forced to bail out three banks whose reserves were robbed of $1bn (approximately € 880 million). That is about an eight of Moldova’s GDP.
Unfortunately, this grand theft took place on the watch of a pro-EU government, which came to power in 2009. Since February 2015 thousands of Moldovans have taken to the streets of Chisinau calling initially for the government’s resignation and then for new elections.
The stolen money triggered a rapid depreciation of the national currency, the leu, and a steep decline in living standards in the poorest country in Europe. Landlocked between Romania and Ukraine, the country depends on migrant remittances for over 25% of its GDP. That is an income that is currently decelerating.