Moldova Roads Sector Finance and Spending Review

Overview & Synopsis

As a small open economy increasingly oriented toward European integration, Moldova’s road network is a crucial element of its economic infrastructure. Persistent structural constraints limited institutional capacity, and mounting pressures on capital and social spending underscore the need for deeper reforms to strengthen resource allocation and enhance overall fiscal performance. This Financing and Spending Review (FSR) evaluates the efficiency and effectiveness of public spending in the roads sector, identifies structural impediments to performance, and proposes a reform roadmap aligned with Moldova's European Union (EU) accession objectives and the EU Growth Plan. The World Bank’s 2022 Public and Expenditure Review (PER) underscored the importance of improving the efficiency and targeting of public expenditures in Moldova. The PER found that the country could achieve similar outcomes while spending roughly 40 percent less, or it could reach the frontier service quality while holding spending constant. Recent International Monetary Fund (IMF) assessments have emphasized the importance of sectoral spending reviews and expenditure rationalization as a means to improve the effectiveness of public spending and safeguard fiscal sustainability, while the EU Growth Plan and the annual Economic Reform Program (ERP) require Moldova to submit credible, sector specific reform commitments supported by evidence on spending efficiency and medium-term fiscal sustainability, with spending reviews embedded in the regular budget cycle. Against this backdrop, sectoral PERs have become indispensable tools for guiding expenditure reprioritization, aligning public spending with EU-accession objectives, and strengthening governance and accountability - thereby ensuring that scarce fiscal resources are directed toward growth enhancing investments and critical social sectors.