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RUNNING ON ALL CYLINDERS?: IMF SAYS ARMENIAN ECONOMY NEEDS NEW ENGINE
Naira Hayrumyan
ArmeniaNow correspondent
IMF Resident Representative in Armenia Guillermo Tolosa (second from
right); Armenian Minister of Economy Nerses Yeritsyan (far right)
during the Monday event
Is it time to replace the engine of the Armenian economy? The
International Monetary Fund (IMF) believes it is. The Armenian
government, meanwhile, says it just needs a tune up.
On July 26, the Armenian International Policy Research Group (AIPRG)
in cooperation with the IMF organized a panel discussion on the
subject of "Armenia's Economic Policy: The Road Ahead". IMF Resident
Representative in Armenia Guillermo Tolosa compared the Armenian
economy to a motorcar that was rolling freely in 1998-2008 until it
encountered storm gusts and ran off the road.
The Government and the Central Bank, with the help of the IMF, got
Armenia out of the ditch, but the engine suffered damage that now
needs attention.
"The new policy should also address [the need for] a new engine,
in this case microeconomic policy," said the IMF representative.
According to the IMF expert, the overhaul would require: an environment
where businesses thrive, attract more workers, pay higher wages, where
a good business climate is created, where there is a high-quality
internet access, streamlined bureaucracy and tax payments, there is
no abuse of power, there are clear social programs with guaranteed
expenditures.
In response (and continuing the motorcar metaphor), Armenian Economy
Minister Nerses Yeritsyan noted that when there are problems with
the engine, the question to discuss is whether it should be replaced
or repaired. He said that the Soviet Zhiguli car (known more as Lada
abroad) breaks down on U.S. roads as frequently as a Mercedes breaks
down on Armenian roads.
Thus, a metaphorical dispute about ways of the country's economic
development was continued in Armenia. International financial
organizations, which supported the economy during the critical period,
insist that Armenia should accomplish a complete transition to market
economy in which there are no monopolies and oligopolies, there is
fair competition and black market is minimized. In comparing itself
to a Lada, the Armenian government admits that the economy moves
along the post-Soviet way, and it is beyond its ability to carry
out the proposed reforms. Thus, the government admits impotence or
unwillingness to deal with monopolies, force big business to pay taxes,
stimulate small businesses and promote exports.
According to Yeritsyan, it is states with knowledge-based economies
that will be competitive in the 21st century. The minister thinks
the priorities of the Armenian economy are the development of
exports, innovation, promotion of business, ensuring the emergence
of enterprises based on high technology, and only in the end, almost
imperceptibly a structural reform of the economy. But it is this
requirement of reform that international organizations advance as
the principal one.
The IMF had extended more than $800 million in credit to Armenia for
the implementation of anti-crisis measures. Armenia's foreign debt as
March 31, 2010 amounted to about $2.98 billion, which was an increase
by 66.6 percent over the size of the external state debt reported for
the same period in 2009. The amount of Armenia's foreign debt saw a
sharp increase due to international loans, including those received
from the IMF ($823 million), the World Bank ($545 million) and Russia
($500 million).
From: A. Papazian
Naira Hayrumyan
ArmeniaNow correspondent
IMF Resident Representative in Armenia Guillermo Tolosa (second from
right); Armenian Minister of Economy Nerses Yeritsyan (far right)
during the Monday event
Is it time to replace the engine of the Armenian economy? The
International Monetary Fund (IMF) believes it is. The Armenian
government, meanwhile, says it just needs a tune up.
On July 26, the Armenian International Policy Research Group (AIPRG)
in cooperation with the IMF organized a panel discussion on the
subject of "Armenia's Economic Policy: The Road Ahead". IMF Resident
Representative in Armenia Guillermo Tolosa compared the Armenian
economy to a motorcar that was rolling freely in 1998-2008 until it
encountered storm gusts and ran off the road.
The Government and the Central Bank, with the help of the IMF, got
Armenia out of the ditch, but the engine suffered damage that now
needs attention.
"The new policy should also address [the need for] a new engine,
in this case microeconomic policy," said the IMF representative.
According to the IMF expert, the overhaul would require: an environment
where businesses thrive, attract more workers, pay higher wages, where
a good business climate is created, where there is a high-quality
internet access, streamlined bureaucracy and tax payments, there is
no abuse of power, there are clear social programs with guaranteed
expenditures.
In response (and continuing the motorcar metaphor), Armenian Economy
Minister Nerses Yeritsyan noted that when there are problems with
the engine, the question to discuss is whether it should be replaced
or repaired. He said that the Soviet Zhiguli car (known more as Lada
abroad) breaks down on U.S. roads as frequently as a Mercedes breaks
down on Armenian roads.
Thus, a metaphorical dispute about ways of the country's economic
development was continued in Armenia. International financial
organizations, which supported the economy during the critical period,
insist that Armenia should accomplish a complete transition to market
economy in which there are no monopolies and oligopolies, there is
fair competition and black market is minimized. In comparing itself
to a Lada, the Armenian government admits that the economy moves
along the post-Soviet way, and it is beyond its ability to carry
out the proposed reforms. Thus, the government admits impotence or
unwillingness to deal with monopolies, force big business to pay taxes,
stimulate small businesses and promote exports.
According to Yeritsyan, it is states with knowledge-based economies
that will be competitive in the 21st century. The minister thinks
the priorities of the Armenian economy are the development of
exports, innovation, promotion of business, ensuring the emergence
of enterprises based on high technology, and only in the end, almost
imperceptibly a structural reform of the economy. But it is this
requirement of reform that international organizations advance as
the principal one.
The IMF had extended more than $800 million in credit to Armenia for
the implementation of anti-crisis measures. Armenia's foreign debt as
March 31, 2010 amounted to about $2.98 billion, which was an increase
by 66.6 percent over the size of the external state debt reported for
the same period in 2009. The amount of Armenia's foreign debt saw a
sharp increase due to international loans, including those received
from the IMF ($823 million), the World Bank ($545 million) and Russia
($500 million).
From: A. Papazian