Moldova to Respond to Economic Challenges and Build Resilience with Continuous World Bank Support

WASHINGTON, May 25, 2023-The World Bank's Board of Executive Directors approved today the Second Emergency Response, Resilience, and Competitiveness Development Policy Operation (DPO2) for the Republic of Moldova. This approved budget support, totaling $134.3 million, will support the Government of Moldova in mitigating the socio-economic impacts of Russia's invasion of Ukraine, particularly on refugees and households. Additionally, it aims to bolster resilience and enhance competitiveness to reduce vulnerabilities to future shocks.

Moldova is currently grappling with unprecedented challenges arising from the spillover effects of the Russia's invasion of Ukraine, significantly impacting households, the economy, and public finances. The country has experienced a considerable drop in its gross domestic product (GDP) due to disruptions in trade, remittances, the energy crisis, and climate-related weather conditions. These pressing circumstances, coupled with the fiscal pressures of supporting refugees and households and an unfinished development reform agenda, underscore the urgent need for support both immediate challenges and long-term transformation in Moldova. To tackle these challenges, the DPO2 focuses on providing legal status and integration support to Ukrainian refugees, enhancing social protection programs for households affected by the invasion and energy crisis. Additionally, the operation seeks to improve energy efficiency, enhance the legal framework for deposit guarantees, corporate governance of SOEs, support railway sector reorganization, and facilitate the digitalization of public services for businesses.

"This emergency budget support that comeswith contributions from our development partners will help the government of Moldova mitigate the ongoing impact of the Russia's invasion of Ukraine on refugees and households severely affected by recent crises," said Inguna Dobraja, World Bank Country Manager for Moldova."I am also pleased that this operation will foster resilience and enhance competitiveness to reduce vulnerabilities to future shocks."

This operation is part of a coordinated financial assistance package to Moldova from international partners in response to the current socio-economic emergency. The package includes contributions from the International Monetary Fund, the European Union, and bilateral partners. The DPO2 comprises an IBRD loan of $100 million and benefits from a co-financing grant of $9.3 million from the Moldova Development Policy Multi-Donor Trust Fund (MDTF), as well as a $25 million concessional contribution from the Global Concessional Financing Facility (GCFF). To date, the development partners' contributions to the Moldova Development Policy MDTF have been received from the United States, Norway, Ireland, and Sweden, with additional partner support expected in coming months, as well as parallel financingrom the Japan International Cooperation Agency.

The DPO2 is aligned with the priorities of the new World Bank Country Partnership Framework with Moldova, as part of broader efforts to support the Moldovan authorities in responding to the immediate impact of energy and refugee crises, while building resilience against future shocks. The operation is also in line with the World Bank Group's Global Crisis Response Framework. Complementing the DPO2 is a comprehensive program of technical support, including just-in-time technical advice on energy security, efficiency, and social protection.

Since Moldova joined the World Bank in 1992, over $1.3 billion has been allocated to more than 60 operations in the country. Currently, the World Bank portfolio includes 11 active projects with a total commitment of $608 million. Areas of support include regulatory reform and business development, modernization of government services, tax administration, land registration, education, roads, health and social sectors, including the COVID-19 emergency response, agriculture, water and sanitation and energy.