EU Technical Assistance Project

“Support the Moldovan Government in identifying and preparing projects linked to the implementation of the Association Agreement”

OVERVIEW

The objective of the ‘PPF Project’ is to strengthen the capacity of the Moldovan national authorities to plan, prepare and manage public investment projects, both domestically and externally financed. Particular attention will be paid to capital projects that support the implementation of the EU-Moldova Association Agreement.

The main beneficiary is the Ministry of Finance (MoF). Assistance is extended to selected line ministries and municipalities.

The PPF Project commenced on 1 September 2020 with an initial duration of 5 years and included 4 components. Following Contract Addendum 1 (18 February 2022) and Contract Addendum 2 (1 July 2024) 4 new components have been added and the PPF Project was extended the Project by one year.

The PPF Project is now due to be completed on 30 June 2026 and includes 8 Components as follows:

Component 1 – Strengthening national external assistance coordination system.

This Component has been completed, also following the transfer of the function of external assistance management and coordination from the MoF to the State Chancellery.

The Component was about assisting the Government of Moldova (at the time represented by the Ministry of Finance) improve the management and coordination of external assistance. Externally funded projects and programmes need to contribute effectively to the Moldovan development objectives, and to Moldova’s obligations to the EU and other international partners.

Among key areas under Component 1 were assistance to create processes for embedding external assistance into the budget process i.e. the MTBF and Annual Budget preparation, and assistance to upgrade and operationalise the Aid Management Platform used for recording and reporting on external assistance flows.

Component 2 – Strengthen the capacity of the national authority for external assistance.

This Component is about assisting the MoF in developing the capacities for public investment planning.

The PPF Project has supported the MoF in the very lengthy process of preparation and adoption of Government Decree on Regulation No. 684 on 29 September 2022. The Regulation launched the new procedure establishing national criteria for identifying, designing and appraising public investment projects in a systematic and technically-sound way before they are put forward for consideration in the budget process. In November 2023, the MoF issued Order No 104 approving instructions to implement the new procedure. In addition, in December 2023, a Project Appraisal IT module developed by the PPF Project team to automate the new public investment project appraisal procedure was inaugurated and is gradually being used by the MoF and line ministries submitting proposals for public investment projects.

Component 3 – Enhancing the capacities of the line ministries in management and implementation of projects financed from external sources.

Under this Component, the PPF Project reaches out to selected line ministries to improve skills and capacities in identifying, designing and implementing capital investment projects as well as in applying the new public investment project appraisal procedure developed as part of Component 2. Considerable support has been provided to date to the Ministry of Energy in the area of renewable energy.

In addition, capacity building in line ministries is being provided through a series of structured training courses in project appraisal, financial analysis and risk assessment and costing. Training has been already provided to the majority of central public authorities as well as to municipal authorities of the Nisporeni Rayon.

Component 4 – Enabling the preparation of a pipeline of high quality and financially viable projects.

This Component is about assisting the MoF in the creation of a ‘Project Pipeline’ which is an integral part of the new public investment project appraisal procedure developed as part of Component 2. The new Regulation 684, when fully rolled out, would not permit public investment projects to be part of the MTBF and Budget unless they have been positively appraised and inserted into the Project Pipeline.

If the new procedure is applied, it is expected to create incentives to line ministries and other central public authorities to carefully design capital projects. The end objective is that only technically sound projects included in the Project Pipeline.

Component 5 – Strengthening debt management through the development of the government securities market and enhancing options for financing of strategic public investments in Moldova.

This Component focuses on the development of the Moldovan domestic market for government securities, both the primary and secondary markets. The PPF Project team assists inter alia with measures to broaden and deepen the market, including the diversification of the investor base (identification of new institutional investors for Moldovan government securities) the improvement of communication with domestic debt market participants and introducing modern debt management instruments. An important aspect of the assistance is the extension of the maturity of the overall portfolio of government securities.

The PPF Project is also assisting the MoF establish the necessary procedures for issuing bonds in international markets either in hard or local currency. The selection of Lead Managers, legal and other necessary advisors for the issuance and the publication of necessary documentation are prerequisites for a successful international issuance.

Component 6 – Supporting The Ministry of Finance in the Implementation of the Public Sector Accounting Reform.

This new Component is about updating and working towards the introduction of the National Public Sector Accounting Standards (NPSAS).

In 2016, Moldova had initiated public sector accounting reform aligned to the International Public Sector Accounting Standards (IPSAS) adapted for Moldova as the basis for NPSAS. The MoF with the help of EU technical assistance at that time had developed 22 NPSAS by the end of 2018, the introduction of which was planned from January 2020 after the adoption of relevant legislative and regulatory changes and the development of an integrated accounting system. The PPF Project will assist MoF to update the existing NPSAS to reflect the changes in IPSAS and develop new NPSAS as required.

Component 7 – Supporting Moldova in Developing Processes linked to the Coordination of Economic Policies with the EU.

Under this new Component, the PPF Project will assist the MoF in the establishment of the European Reform Programme (ERP) preparation process in Moldova.

All EU candidate countries submit annually an Economic Reform Programme (ERP) document to the European Commission. The ERP document contains medium-term macroeconomic projections (for a number of economic indicators including growth, inflation, the external balance and capital flows), budgetary plans for the next three years, as well as a structural reform agenda. The structural reform agenda includes reforms to strengthen competitiveness and improve conditions for inclusive growth and employment creation in a number of areas. The ERP document plays a key role in the bilateral dialogue of the EU candidate country with the EC on economic and financial matters.

Component 8 – Support to the communication of PFM reform and the PFM strategy.

This new Component is about developing capacity within the MoF for communicating the PFM Strategy and ongoing reforms, including the European integration process that falls under the responsibility of the MoF.

PFM is a critical element in Moldova’s process towards EU membership and the Ministry of Finance will require support in communicating on planned PFM reforms as required by the EU integration process.