On April 7, two days after Parliamentary elections, a large-scale and violent protest caught many by surprise.  The tensions and polarization that has been created within Moldovan society will pose a significant challenge to the next Government in Chisinau.  The political tensions could be further exacerbated by the global economic crisis.

Between the 2005 and 2009 Parliamentary elections, the majority and the opposition undertook important governance initiatives aimed at furthering political reforms and integration into EU frameworks for cooperation. Despite the significant growth and poverty achievements during this period, the current global financial crisis and the deepening recession in Europe threaten to roll back governance gains after a decade of gradual transition. With more migrants returning home, declining remittances, and diminishing fiscal resources, Moldova will need to put in place vital policies to promote macro-economic stability, effective safety nets, and the efficient and equitable use of reduced fiscal revenues.

In January 2009, the World Bank’s Board endorsed the new Moldova Country Partnership Strategy (CPS). Moldova’s CPS aims to assist the Government in countering the economic downturn, maintaining macroeconomic stability, and diversifying its remittance economy by providing a healthy business environment and investments in human development. Moldova’s growth and poverty alleviation achievements have been impressive considering the challenging environment and external shocks–an average economic growth of 5.8 percent since 2000, and a decrease of poverty by 40% over the previous Country Assistance Strategy period, FY05-08.

One of the thrusts of the new CPS is to assist Moldova’s aspirations to establish sustainable rule-based governance and control corruption, which if both successful will draw the country closer to Europe. To meet this longer-term objective, Moldova needs to develop an effective national administration, public sector governance and controls, rule of law, policy formulation, good governance of key agencies (e.g. customs, tax administration and the anti-corruption agency), market regulation and project management capacity.  In addition, there is a need for sound internal and external audit institutions and compliance with international standards that would engender public confidence in the way Moldova is being governed and accountable to its citizens.
The lessons form the Bank’s previous experience in Moldova and the current economic downturn prompted a renewed mid- and longer-term approach for providing assistance where the World Bank will seek to:

• align Bank efforts with the objectives of National Development Strategy (NDS) and emphasize country ownership in strengthening country systems and public procurement;
• approach the governance challenge in Moldova not only as cross-cutting but also with a focus in two key development areas–creating a competitive business environment and improving human development;
• increase resources going towards strengthening the voice of the private sector and civil society in the Bank’s sectoral and project-level assistance;
• support the implementation of partners’ anti-corruption programs by providing cross-country governance monitoring and analysis.

Specifically, the World Bank will continue to assist the Government in advancing public sector reform through policy lending, public sector management reform grants and technical assistance. Building on the progress made with public finance management reforms, the World Bank will extend its efforts for assisting the Government in improving country systems, with a focus on public procurement, financial management, internal and external audit institutions as well as building capacity in central and line ministries for better performance of the public investments in infrastructure. This will provide the foundation for a gradual transition towards greater budget support.

According to the World Bank, the Bank’s portfolio will continue to face significant fiduciary risks.  However, the Bank intends to continue to strongly encourage the use of country systems for selected sectors and projects by upgrading the procurement capacity, improving the project management arrangements, and strengthening the controls built into the project design. The Bank will explore the possibility of piloting the implementation of the first investment loan entirely using country systems.

Full text of the World Bank Country Partnership Strategy and Governance and Anti-Corruption Strategy >>