The EBRD stands ready to ramp up activity in Moldova if an IMF loan programme can be put in place, the Bank’s regional head has told Emerging Markets.
Francis Malige, managing director for eastern Europe and the Caucasus, said an agreement between Moldova’s new government and the IMF would be “a key benchmark of positive evolution” for the troubled Balkan state.
“If an IMF programme can be agreed, we will be able to put a number of projects in Moldova back on the high priority list,” he said. “We will also go back into the financial sector in a much more meaningful manner than has been possible in the past 12-18 months.”
The EBRD had distanced itself from Moldova’s larger banks in recent years as concerns mounted over governance in the sector.
These came to a head in November 2014, when $1bn — equivalent of more than 10% of Moldova’s GDP — went missing from three local lenders. A report by US investigative consultancy Kroll linked the disappearance to changes of ownership.
“We had repeatedly warned the authorities about a lack of transparency in the shareholding structure of Moldovan banks,” said Malige.
BANKING CRISIS
The scandal sparked political turmoil in Moldova and prompted the resignation of central bank governor Dorin Dragutanu in September following widespread protests at his handling of the crisis.
The appointment of a new governor, former BNP Paribas banker Sergiu Cioclea, was approved by Moldova’s parliament in March.
The three banks involved in the scandal have been shut down. Concerns remain, however, around Moldova’s three largest remaining lenders. Moldova Agroindbank, Moldindconbank and Victoriabank are being audited by the central bank.
The EBRD owns a minority stake in Victoriabank but is unable to work with the lender, which has not had a functioning board of directors since September, Malige said.
The banking crisis has hindered EBRD’s ability to provide funding to Moldova’s real economy, he added. “The banks that currently fit our criteria in terms of both credit and transparency represent a tiny share of the market. This means a lot of opportunities for Moldova’s entrepreneurs are being lost.”
An IMF deal could unlock both new funding and funds that have already been approved, said Malige. “A number of EBRD projects have been signed, for example in the water sector, but have yet to disburse because conditions haven’t been met,” he said.
“There are also projects that are important for the energy security of Moldova that we are preparing with our partners in the European Union and the European Investment Bank, which I’m sure in the right context could be accelerated.”