(Bloomberg) -- Moldova is on track to unlock more European Union financing after securing preliminary approval for a $564 million loan from the International Monetary Fund as its recovering economy faces threats from surging energy prices and a resurgence of the Covid-19 pandemic.

The nation of 3.5 million people, Europe’s poorest, realigned its political orientation toward the EU from Russia through elections this year, having received 127 million euros ($148 million) in aid from the bloc in 2020.

While some reforms must still be completed before the IMF’s board signs off on the cash, the first disbursement will “hopefully” arrive by year-end, according to central bank Governor Octavian Armasu.

Moldova has endured years of corruption and scandals, leaving the country dependent on foreign funding that’s faced repeated delays over concerns about democratic standards and a lack of progress in recovering assets stolen in a $1 billion banking fraud in 2014.

The new government plans to urgently overhaul public institutions to improve governance and strengthen anti-corruption efforts -- key requirements under the IMF deal, Armasu said. The central bank’s independence and its continued fight against money laundering are similarly crucial to maintain the deal.

“We’re also counting on funding from the EU from ongoing programs and more are on track to be launched,” Armasu said this week in a phone interview from Chisinau, the capital. He declined to comment on a 600 million-euro multi-year deal with the EU being negotiated by President Maia Sandu.

There’s a long list of conditions to unlock that cash. In the medium term, Moldova may be ready to sell its first Eurobonds, according to Armasu.

As European natural gas costs soar, Moldova is struggling to agree on a new long-term contract with Russia or other suppliers after its previous one expired last month. That’s forcing the government to trigger a state of emergency in the energy sector that involves releasing budget funding to buy fuel on the market.

Higher energy prices will require well-tuned monetary-policy tightening to tame inflation without harming economic growth, Armasu said. The central bank has already hiked borrowing costs three times this year. 

“It’s a difficult dance to perform,” he said. “But we’re taking the necessary steps.” 

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