Moldova initially suffered from the difficulties of the Russian economy, but left the ruble area and introduced its own currency two years after independence. Monetary and exchange rate policies and institutions evolved over a long period at the end of which it adopted inflation targets, But it was unable to attain the targets consistently for more than a few years.

Years Targets and attainment Classification
1992-93 independence (out of USSR) August 1991; relatively rich Trans-Dniester region seeking independence since 1990, armed conflict 1992 with Russian involvement, ceasefire mid-1992; at first continued use of Russian ruble but aim of introducing new national currency, within wider but gradual move to market economy; central bank set up mid-1991 from local branch of USSR central bank, short on personnel and expertise, able in principle to set limits on banks’ interest rate spreads, to set quantity and price of refinancing and to set reserve requirements, but large fiscal deficit and credit allocation is decided mainly by government; other banks reorganised, some new small commercial banks; membership of ruble area limits scope of monetary policy and exposes economy to Russian developments; 1992 cash shortage, large inter-enterprise arrears, rapid credit expansion allowed; ruble-denominated coupons issued mid-year become main element of cash in circulation; fixed official and floating interbank exchange rates, unified at market rate September 1992; interest rates aligned with Russia; Russian currency reform mid-1993 unstructured discretion UD
1994-2011 after phasing out of preferential credits to priority sectors and start of central bank regular credit auctions, national currency issued November 1993 at rate of 1 leu = 1000 coupons; start-1994 central bank given responsibility for monetary policy and greater role in bank supervision; central bank now using reserve requirements and interest rates more, as well as credit auctions, with focus of policy on reserve money; forex interventions limited in principle to smoothing, but in practice exchange rate stabilised vs USD; treasury bills issued but secondary trading limited; some OMOs from 1997; ongoing issues of fiscal control, continuing delays to structural reforms; Russian financial crisis August 1998 has severe adverse effects including sharp depreciation, renewed rise in inflation, weakening of banking sector, and rapid dollarisation; heavy use of reserve requirements; treasury bill market freezes but recovers from 2000; major change of government 2001 delays, but does not alter direction of, economic policies; remittances from workers abroad become more important from 1998; 2004-5 political pressures for exchange rate stability vs USD; 2005 greater use of issues of central bank certificates and deposit auctions; increased focus on European integration; 2006 Moldovan wine subject to Russian embargo; 2006 price stability made primary goal of central bank, but financial markets still shallow, monetary transmission weak, and dollarisation high; 2007 rising FDI inflows; GFC 2009 leads to deep but short recession; 2010-12 adverse effects from euro area crisis; 2010 new monetary policy strategy announced, including inflation target pursued mainly via OMOs, with policy rate and wide corridor, but targets well overshot 2010, 2011 loosely structured discretion LSD
2012-14 wide inflation targets met; 2012 drought; rising concerns about financial problems at some banks; 2014-15 political deadlock and tensions; late 2014 banking crisis: disclosure of fraud in three related large banks leads 2015 to their collapse and costly closure, collapse of (local currency) interbank market, and resignation of central bank governor and first deputy governor loose inflation targeting LIT
2015-17 inflation targets well overshot 2015, undershot 2016 and overshot 2017, no data on expectations; shallowness of financial markets, weakness of banks and intermittent forex interventions make for poor monetary transmission mechanism; growth of lightly regulated non-bank credit organisations; statistical data adequate by end of period loosely structured discretion LSD

Selected IMF references: Pre-membership Economic Review 1992 pp3-15; Pre-membership Economic Review Supplement 1 pp60-3; RED 1993 pp18-22, 24, 78-83; SR 1993 pp5-9; RED 1994 pp16-21, 24-25, 73-4; RED 1995 pp12, 67-8; SR 1995 p10; RED 1996 pp17-20, 23; SR 1996 pp17-19; RED 1998 pp21, 25, 28-34; SR 1998 pp8, 13-16; RED 1999 pp19-23, 36-8; RED 2000 pp23-5, 35; SR 2000 pp18-19; SR 2004 pp13-14; SI 2005 pp7-8, 12-22, 25-6; SR 2005 pp7, 14-16, 24-5; SR 2006 pp9, 13, 17; SR 2008 pp10-12, 19-21; SI 2010 pp31-5; SR 2010 pp15-16, 17; SR 2014 pp8-9, 14-15; SR 2015 pp7-10, 15-16; SR 2017 pp8-10, 13-15, 18-19; SR 2020 pp22-4; SI 2021 pp3-12. Other references: National Bank of Moldova (2010, 2012) and website for data.

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