Moldova is suffering from the economic consequences of the war

The Russian invasion of Ukraine has prompted a rush to provide loans to help tiny Moldova deal with the financial blow of the war raging beside it. Things are so dangerous that the International Monetary Fund is now calling on states to send cash.

The conflict is increasing pressure on the former Soviet nation as it begins to try to correct bribery and other structural problems. Moldova is somehow still trapped between two worlds. It hopes to join the European Union, but is still energetically tied to Moscow. Tensions are also rising in pro-Russian separatist Transnistrian territory, raising concerns that Moldova could be embroiled in a wider conflict.

The war in Ukraine could potentially push Moldova into a decisive break with the past. The government has stepped up its bid to join the EU and, since February, has the technical capacity to switch from Russian to European electricity and gas networks.

However, with annual inflation at 22%, with growth collapsing from 14% after the pandemic in 2021 to a projected 0.3% this year and with exports and remittances halted, the conflict could still to destabilize the nation of 2.6 million people.

The danger, according to Rodgers Chawani, the IMF’s permanent representative in Moldova, is that they will borrow so much to save the country from external shocks that there will be nothing left for internal reforms.

“At what point will they be able to focus on their own agenda?” Chawani asked, worrying that, as institutions like the IMF could only lend, the accumulated debt would consume future revenue that would have to be spent on growth.

“The problem is that they could be overburdened,” he said, speaking at his office in Chisinau, the capital of Moldova. “That’s why we ask bilateral donors to offer more grants.”