What has gone wrong in Moldova? Last year the government failed to complete a number of key reforms, such as the planned privatization of the tobacco sector, and its budget deficit began to run out of control. As a result, the IMF decided in February to suspend a $185 million extended fund facility (EFF) for the country - the second time it has halted disbursements since the facility was first agreed in 1996. Meanwhile, Moldova is finding it hard to borrow internationally and foreign investors are deserting its domestic debt market.
This sequence of events may be commonplace in some parts of the former Soviet Union. Not in Moldova, however. For much of the mid-1990s, investment bankers fêted the former Soviet republic as a classic case of triumph in the face of adversity. Soon after the break-up of the USSR that led to Moldovan independence, it seemed that Moldova too would break into two pieces as ethnic Russians in the Transdniestr region to the east of the country pressed for autonomy and a bitter civil war broke out.
The separatists would have taken with them most of Moldovan manufacturing industry, leaving a rump country dependent on agriculture.