Moldova

L'action de l'AFD en Moldavie — © Paul Lemaire / AFD

Since 2021, AFD has been supporting the Republic of Moldova in its convergence towards European Union standards and the implementation of the Paris Agreement. The AFD office was opened in Chisinau in February 2022.
AFD provides technical assistance in this small landlocked country in Eastern Europe to build its capacities in the energy and rail sectors. It also plans to support the sustainable development of the forestry, irrigation and water and sanitation sectors in the coming years.

Context

Moldova is a small country bordering Romania and Ukraine and situated between two distinct spheres of influence: the European Union (EU) and the Commonwealth of Independent States (CIS).

Several decades of economic growth have enabled Moldova to join the category of upper-middle income countries, although it remains one of the poorest in Europe.
Moldova's economy is characterized by high imports, financed in part by remittances from the diaspora, mainly located in EU and CIS countries. The emigration of young people contributes significantly to the demographic decline of an aging population, half of which lives in rural areas. The country has lost a quarter of its population since its independence in 1991.

The Soviet legacy is still strong: the country mainly hosts Moldovan nationals, as well as Romanian, Ukrainian, Bulgarian, and Russian nationals. Although the rule of law is fragile, the State has a strong presence, notably through numerous state-owned companies.

The country is also marked by the persistence of a “frozen conflict” in the predominantly Russian-speaking region of Transnistria, which attempted to secede in 1990 and declared itself independent following a violent conflict in 1992.

Despite these challenges, Moldova has many strengths, such as its ambitious reform agenda and its sustained economic growth (prior to the Covid-19 crisis and the war in Ukraine). The election of the pro-European, anti-corruption candidate Maia Sandu in November 2020, as president of the Republic of Moldova, has raised high expectations. Following several decades of oligarchic and Russian influence, the president has pledged to reverse this trend by putting the country back on the path of reform, to strengthening the rule of law and ending corruption, as planned in the ambitious Association Agreement signed with the European Union in 2014.

In this context of renewed bilateral relations between France and Moldova, AFD started its operations in June 2021. AFD’s intervention mandate targets the convergence towards European standards and compliance with the Paris Agreement. Potential avenues of cooperation have been identified in the fields of energy, railway, forestry and irrigation. Since the outbreak of the conflict in Ukraine and its consequences on Moldova's finances, AFD has positioned itself as a trusted partner by preparing an initial budget support loan.

AFD's Moldova office is directly attached to the Eurasia regional office in Istanbul.

Our approach

"AFD and Moldova: Supporting the convergence towards European standards and the transition to asustainable economy"

AFD focuses its action on universal access to efficient and low-carbon energy services.

The Republic of Moldova is still largely dependent on gas imports from the Russian Federation and on electricity imports from Transnistria, a dependency that exposes the country to market price fluctuations. AFD supports the country in its fair energy transition. AFD supports, for example, the Moldovan government in its efforts to structure the electricity market by developing a regulating framework adapted to the promotion of renewable energies and energy efficiency. We fund technical assistance with the French electricity transmission system operator RTEi to support its Moldovan counterpart Moldelectrica to join the European electricity network.

AFD carries out activities in a broader framework of support for renewable energies. A budgetary loan of 60 million euros for public policies dedicated to energy and railway sector co-financed by the World Bank (150M$) will allow to increase the renewable energy capacities up to 400MW by 2025, excluding the use of forest biomass in order to combat deforestation.

AFD supports the development of reliable and sustainable transport infrastructure in Moldova. The country wishes to benefit from its strategic position as well as from the expansion of its port infrastructure located along the Danube in Giurgiulesti. First road rehabilitation projects aim to restore, modernize and develop its transport infrastructure in a regional integration context.

Within the framework of the Association Agreement signed with the European Union in 2014, Moldova has committed to aligning with European standards on rail transport.

In order to promote rail as a sustainable alternative to road for the transport of goods and people and in order to develop the Moldovan railway sector, AFD supports CFM, the National Railway Company, through a technical assistance program.

In parallel, AFD supports the reform of the railway sector public policies via a 60 million euro budgetary loan, co-financed by the World Bank (150M$). On May 24th 2022, AFD Chief Executive Officer Rémy Rioux and the Deputy Prime Minister and Minister of Infrastructure and Regional Development of Moldova Spînu have signed a memorandum of understanding to anchor the desire of both institutions to cooperate on energy and railway issues.

With the Ukrainian crisis added to the health and energy crises, the Moldovan State’s financing needs have been considerably increased reaching approximatively 1.6 billion euros for 2022 and 2023 according to the IMF. AFD has provided a financial and humanitarian response to those challenges. Thus, at the request and on behalf of the French government, AFD has rapidly appraised a 15 million euro macroeconomic consolidation budgetary financing on behalf of and at the risk of the State. This financing contributes to covering some of the country’s external financing needs, particularly for the social expenditures.

On humanitarian front, AFD and Fondation de France support the solidarity activities of French civil society organizations by financing a consortium of French NGO’s (Solidarités International, Handicap International, Médecins du Monde) up to 2 million euros in order to meet the challenges of welcoming young refugees and providing access to education, while fostering the resilience of Moldovan’s society.

The private sector represents more than 77% of employment in Moldova and will play a crucial role for a fair transition. Proparco, subsidiary of the AFD group focusing on private sector, supports Moldova and its private sector which is facing major challenges due to the economic repercussions of the conflict in Ukraine.

Proparco has signed at the end of May 2022 its first operation of 8 million euros loan to help the country’s leading microfinance institution Microinvest to serve an increased number of microentrepreneurs and SMEs, in particular businesses in rural areas and in the agricultural sector and to further develop its loan portfolio.

Thus, Proparco’s loan should directly and indirectly support around 3600 employments over the next 5 years.

Expertise France, the international technical cooperation subsidiary, has been present in Moldova since 2021. An international technical expert, deployed by Expertise France on behalf of the Ministry of Foreign Affairs and Europe has been supporting the Presidency since

October 2021 on the recovery of stolen assets which has been at the heart of the political agenda in Moldova since the bank fraud of 2014.

In parallel, Expertise France, in partnership with Lithuania, is implementing a project to support to the judicial system (ETAAJS) with European funding. Its aim is to improve transparency, accountability and access to the judicial system.

Finally, Moldova has benefited from a European project in the field of statistics, implemented by Expertise France in partnership with the Consortium of national statistics institutes (including INSEE), a project in which Moldova has particularly been very active.