Inguna Dobraja: The World Bank Group to support Moldova’s sustainable, green and inclusive development in its journey to EU accession

World Bank Country Manager for Moldova Inguna Dobraja has given an interview exclusively with the MOLDPRES State News Agency on the World Bank’s cooperation with Moldova, including the new  Country Partnership Framework.    

MOLDPRES: Dear Ms.  Dobraja, the World Bank recently announced the new Country Partnership Framework with Moldova. This year the Republic of Moldova and the World Bank are also starting their fourth decade of collaboration. Before we discuss the new partnership strategy, we would like to hear from you how this collaboration began.

I.D.  Indeed, we recently celebrated the 30th anniversary of partnership between Moldova and the World Bank Group. We started our collaboration just a year after the country had gained independence and a few months after the war on the banks of the Nistru river had come to a standstill. In addition, a severe drought then hit Moldova. So, 30 years ago, in 1993, we provided the first financing for the Emergency Drought Recovery Project in the amount of US$ 26 million. Ever since, we have advocated for improved governance and transparency, supported important policy reforms and investments in roads energy, agriculture, schools, hospitals thus contributing to improving the lives of ordinary Moldovans.  More than $1.5 billion has been allocated to over 70 operations in the country.

MOLDPRES: Do you consider these 30 years successful? What are the main achievements? At the same time, what are some of the areas that continue to lag behind and require further concerted efforts?

I.D.  Since the early 2000s Moldova has made significant progress in reducing poverty and promoting inclusive growth after going through the shocks of the 1990’s.  Moldova was among the top 15 countries in the world and among just 3 countries in the Europe and Central Asia region which managed to eradicate extreme poverty between 2000 and 2015. Policy reforms have deepened the path toward European integration, and despite difficulties, Moldova made important steps forward by signing the Association Agreement with the European Union in 2014 and by obtaining the liberalized visa regime for Moldovans. In 2020, Moldova graduated from a lower middle-income country to an upper-middle income country. And in June last year, your country was granted EU candidate status, which is a great achievement, but also a commitment to continue and accelerate reforms. 

The World Bank’s is proud to partner with Moldova and continue supporting the country’s development. Let me share just a few highlights of our cooperation. We have a long-standing engagement in agriculture and since 2003, 1,000 business start-ups have been launched, creating more than 5,600 new jobs, along with supporting Moldova’s preparedness to export a number of products to the EU.  As a result, 47 agriculture producer groups are now able to access premium EU markets for fruits and vegetables.  We have supported improvements in the business environment - creation of an online one-stop shop for business permits and a reduction in the number of days required for business registration from 14 to 4, leading to savings of over US$17 million annually for businesses. In advancing digitalization, MConnect--the government’s interoperability platform and the backbone of further public service modernization-- was created and facilitated the transition from paper-based to online processes, along with MSign. We helped to improve the reliability and quality of district heating services for consumers and enhanced operational efficiency and financial viability of Chisinau’s district heating company. The World Bank's emergency COVID-19 response was swift, with medical relief and social support to the most vulnerable, and much-needed cash transfers to about 72,000 poor households came in due time.

The World Bank helped to purchase 10,000 laptops for school children to continue learning during the pandemic. Between 2015-2018, 20 hub-schools across Moldova were renovated and supplied with furniture, learning aids, and software to accommodate the diverse needs of children with disabilities. We invested in improving the road infrastructure and providing safe and all -weather accessible roads y to education, health, and market facilities across Moldova.

Moldova made significant progress in many areas, however, the speed of the reforms could have been faster. Some of the reforms, such as of the justice sector, business environment, restructuring of state enterprises were slow or lagged behind in implementation. Frequent government changes often resulted in shifting strategic priorities and lack of policy continuity.  Low labor productivity and skills mismatch in the labor market, outmigration, infrastructure gap, and climate-related shocks are some of Moldova’s development challenges. For many years, business confidence was low due to issues around transparency, accountability, and corruption. Large-scale out-migration, combined with decreasing fertility rates, has led to an alarming decline in the population and an increased share of elderly people, putting pressure on the pension system and government finances. Further reforms to improve environment for entrepreneurship and innovation will attract much needed investment and strengthen the country’s competitiveness. And more and better investments in education and health will improve the country’s human capital, which, in turn, is essential for Moldova’s sustainable social and economic development. 

MOLDPRES:  How is the World Bank currently helping Moldova, especially given the geopolitical uncertainties and a series of consecutive crises?

I.D.  We are starting our fourth decade of collaboration with Moldova during very unfortunate circumstances that were hardly imaginable 14 months ago. No doubt, it was challenging then, the country was recovering from the COVID-19 pandemic and was hit by high energy prices, but the devastating Russian invasion of Ukraine dramatically multiplied those challenges. Moldova became the country receiving the highest number of refugees per capita in Europe, as hundreds of thousands of people chose to escape war and find shelter here. And Moldova’s amazing effort in helping the neighbor in need could not remain unseen and drew extraordinary humanitarian, financial and political support from the international community.

The World Bank, like many other development partners, responded swiftly to this unprecedented crisis by providing budget support loan to the government, in the amount of US$150 million. The World Bank mobilized grant financing of US$ 9.24 million from the Global Concessional Financing Facility to supplement the loan. This financing helped to support refugees and households, as well as build resilience to future shocks. Subsequently, the World Bank came up with an initiative to establish a Multi Donor Trust Fund to raise grant resources for Moldova, and in December 2022 a grant financing package in the amount of $43.76 million was approved. The first grant financing for this budget support included contributions from Norway’s Ministry of Foreign Affairs and the United States Agency for International Development. We definitely intend to continue mobilizing more donor grant funding to support Moldova’s immediate and long-term development needs.

As for our ongoing program in Moldova, we currently have 12 projects with a total commitment of $650million that are being implemented by government counterparts. Areas of support include regulatory reform and business environment, modernization of government services, tax administration, land registration, education, roads, health, agriculture, water and sanitation and energy. We always aim to support areas that will have the most impact for the population. Through this support, more citizens can use better local roads to access hospitals, schools, markets, and government services. And as we speak, the World Bank is preparing another tranche of budget support loan in the amount of US$ 100 million to help the Government cope with the ongoing challenges, but also to enhance resilience and increase competitiveness. This WB loan part of a coordinated financial assistance package from several development partners who provide both loan and grant financing.

MOLDPRES: This is impressive, indeed. Let’s now talk about the future. And here comes the new Country Partnership Framework for the next 5 years. Can you tell us about the main objectives of this new strategy?

I.D. As you mentioned in the beginning of our discussion, the World Bank recently endorsed the new Country Partnership Framework (CPF)) for the coming five years. This new framework for the period 2023-27 will support the government’s efforts to move to a new economic model and is well aligned with the priorities of the Moldova’s National Development Plan European Moldova 2030.

The CPF aims to support the dual challenges of the current crisis stemming from Russia’s invasion of Ukraine as well as longstanding and longer-term reform challenges and the goal to advance toward EU accession. The CPF identifies activities – both lending and analytical – for the initial period of the CPF and leaves flexibility to program the outer years to accommodate for changing environment.

The overarching objective of the CPF is to support green, resilient, and inclusive development and competitiveness in Moldova. The framework is based on three high-level objectives: (i) increased formal employment; (ii) improved human capital; and (iii) increased green and resilient investments. The objectives of the CPF will focus on key areas including enterprise competitiveness, decreased regulatory burden, key aspects of health and education services, increased energy security and efficiency, and green investments, particularly in infrastructure and agriculture. A critical feature of the CPF will be capacity-building and digitization efforts to strengthen systems and institutions across a broad swath of government and private sector actors at national and local levels.

MOLDPRES: You just mentioned the three main higher-level objectives of the new partnership framework. How did you identify them and why do you think those are most important?

I.D.  As I mentioned earlier, the CPF is aligned with Moldova’s government medium-term strategy, but it is also based on our systematic approach to each CPF cycle. In 2021 we conducted our Systematic Country Diagnostic update, a very important study that helps our experts identify overall development challenges faced by Moldova. In addition, for the first time, we conducted a Country Private Sector Diagnostic, another analytical study that focuses on the issues encountered by the private sector of the country. Last but not least, the Completion and Learning Review of the outgoing CPF that helps us learn from pervious strategy’s implementation experience. And of course, consultations with a range of stakeholders at various levels of government, private sector, civil society, and development partners. The resulting framework reflects a consensus of stakeholders on the reform process and a shared understanding of development priorities and challenges facing the country. All these components help us formulate the main higher-level outcomes of the new partnership framework.  

MOLDPRES: Do you expect the CPF implementation to be successful? What are the main risks and obstacles that may slow it down?

I.D.  Certainly, there are risks to our new CPF implementation in Moldova. And those risks are pretty similar to other countries in the region, such as: political and governance, macroeconomic risks, institutional capacity for implementation and sustainability, etc. But such risks are familiar to us, and we have learned how to mitigate them over the years in different countries through different approaches, including in Moldova. I already mentioned the cyclicity of our CPF process, and one of the good instruments that we use to manage risks is the Performance and Learning Review, which is conducted around the mid-time of the implementation process.  This document helps us assess the progress in implementing the CPF program and to introduce necessary changes and course corrections in consultations with interested stakeholders.

Unfortunately, one of the most significant risks to the program which emerged during the preparation of this CPF, and which regrettably persists, is the uncertainty caused by Russia’s invasion of Ukraine. It had a significant impact on the way we in initially thought about the strategic priorities of our engagement and will continue have an impact on the way program evolves, to mitigate this risk, the CPF program has built in considerable flexibility to address crises situations should they occur. This could for example mean refocusing from longer-term development priorities and opportunities to helping Moldova with emergency budget support.

In this respect, we understand that challenges in Moldova and in the region may persist, and we do not have any certainty of when the Russia’s aggression against Ukraine will end and what will be the ultimate impact, including on Moldova and other countries in the region. But we will stand with Moldova through these difficult times and as I said, provide support both to address the crisis and the medium-term development priorities. 

I hope, however, that things will start getting better soon and Moldova will continue its journey on the path towards EU accession, especially since the EU candidate status which I mentioned above was recently followed by the EU Parliament resolution regarding initiation of talks on Moldova's accession to the European Union before the end of 2023, after it fulfils the recommendations of the European Commission. We, in the World Bank, remain committed to working together with all stakeholders in supporting the much-desired EU integration and building a prosperous and inclusive society for all Moldovans. 

MOLDPRES: Mrs. Inguna Dobraja, thank you for the kindness to give this interview with our agency.