Moldova: Poverty Assessment

by World Bank Group

'The poverty of individuals and households in Moldova have mirrored the causes of the overall slowdown in the economy. Many enterprises found that the post-Soviet economic structure resulted in a vast increase in the ratio of their input prices to the market price of their output.' Moldova is having an arduous transition from being a centrally-planned economy to one that is guided by market signals. This and the regional crisis in 1998 have exacerbated poverty and inequality levels in Moldova. This report provides a detailed analysis of the situation regarding living standards in the country and provides a framework for policy for the Government's emerging social assistance program. It examines the composition and distribution of poverty in Moldova, how income and price shocks have affected the lives of the poor, and the role of the Moldovan state in easing poverty. It concentrates on analyzing the results for the Right Bank of Moldova, so that any references to Moldova imply the Right Bank. The report will interest members of the Moldovan government, Bank staff, and anyone studying Eastern Europe in general and Moldova in particular.

85 pages, Paperback

First published December 1, 1999

About the author

The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and most famous development bank in the world and is an observer at the United Nations Development Group. The bank is based in Washington, D.C. and provided around $61 billion in loans and assistance to "developing" and transition countries in the 2014 fiscal year. The bank's stated mission is to achieve the twin goals of ending extreme poverty and building shared prosperity. Its five organizations are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID).

The World Bank's (the IBRD and IDA's) activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation and rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, and electricity), large industrial construction projects, and governance (e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the country's economy as a whole. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution, or not, such as in the World Bank financed constructions of paper mills along the Rio Uruguay in 2006.

Reviews

[Nathan Albright · Rating 4 out of 5]

Spoiler Alert:  This book was written in the 1990's and Moldova is still an economic basketcase more than twenty years later.  To be sure, Moldova is less poor than it was before, but this particular book discusses some of the structural changes that were recommended for Moldova's economy and one can still see the need for structural reforms to increase growth and reduce poverty and give some chance of hope and progress for children from poor families as that is still missing in Moldova today.  What went wrong?  That is a subject that would require much more extensive writing, but the political corruption, internal division, powerful vested interests that resisted change, Russian pressure and a lack of economic independence, and weak administrative capacity are all problems that this book discusses as being issues in the early independent Moldovan Republic and they remain problems for contemporary Moldova a generation later.  This sense of frustration and a lack of forward progress likely has sapped a great deal of the native well of optimism that exists in a nation like Moldova, where there is even a question as to whether they ought to be an independent nation at all given their cultural and linguistic ties to neighboring Romania.

This book is a short one at less than 100 pages.  It begins with an abstract, currency equivalents between the $ and lei, and an executive summary for those who cannot be bothered to read the whole short book.  After that there are three chapters.  The first chapter of the book discusses Moldova's intense relative and absolute poverty and its problems in making the transition from a command to market economy over the course of the 1980's (1), including the nature of the poor in children and families with children and in unemployed young workers and some vulnerable elderly people.  After that the author discusses the relationship of prices and incomes with poverty, the overall labor dynamics that discouraged the outright laying off of workers while keeping them in a state of permanent unpaid leave (2) and in the informal economy that sprang up around temporary work, migration, and smuggling.  After that the author discusses the role of the state in seeking to alleviate poverty through a re-targeting of social welfare away from politically important sectors to more vulnerable ones, and in the importance of education in creating opportunities for poorer Moldovans (3), after which there are references.

One thing that is sure is that the nation of Moldova was in a grim state when this book was written.  Over the course of the decade of the 1990's, only one year, 1997, saw any economic growth whatsoever at an anemic 1.7%.  During 1992 and 1994, there were declines of around 30% each of those years in economic growth as Moldova sought to change from a command economy to a market economy without making reforms to its state-run collective farms.  Wealthy Moldovans of the late 1990's made about $1000 a year, which was enough money to put them in the top 20% of the country and in their elite as far as consumption was concerned.  Nowadays, the per capita income of Moldovans in purchasing power is still less than $10,000, but things have gotten at least a little better.  It is difficult to imagine that the Moldovan government and administrative elite has the wherewithal to do more for their people in the absence of unity and in the inability of the nation to find markets for its agricultural products or a way out of corruption and disunion.  It is easy to be empathetic to the country and to wish their nation and its people a better fate, even if it is hard to see how that could happen.