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THE STATE WILL GRADUALLY SHIFT THE MACROECONOMIC ACCENTS
Aram Gareginyan
ArmInfo
2010-10-21 17:40:00
Interview of Armenian Finance Minister Tigran Davtyan with ArmInfo
news agency
During the program of participation in the annual meetings of Governing
Boards of the World Bank (WB) and the International Monetary Fund
(IMF) in Washington, Armenian Finance Minister Tigran Davtyan agreed
to devote some time to conversation with ArmInfo correspondent.
The minister answered questions about the forthcoming economic policy
of Armenia, including cooperation with IMF and WB
Tell me, please, about the program of the Armenian delegation that
attended the IMF/WB annual meetings on October 7-10.
Over the two days we held over 20 meetings with the representatives of
both IMF and WB, particularly, with experts and heads for our region,
as well as with the IMF and WB leaderships. We discussed the issues
that we were constantly working at with the WB and IMF Permanent
Representatives to Armenia. Each program, no matter whether it is
financial support or a loan, includes a number of reforms to ensure
its effectiveness. Detailed and bilaterally interested discussions
on these programs were held.
The Armenian government has stated its intention to pass from the
expansive economic policy to the restraining one. In Washington such
recommendations to the governments were made by the IMF top management
as well. If the fiscal impetuses are taken out of the economy, will
our private sector be able to replace them with an adequate demand?
Actually, the fiscal impetuses were used during the crisis as
effectively as possible. In the post-crisis period, we gradually
shift accents to restrictive policy, including inflation restraining,
since inflation pressures have turned out to be quite high in 2010.
Certainly, such transfers are not carried out all at once; we shall
gradually change the atmosphere taking into account the general
macroeconomic developments. As for the demand, we managed to attract
a considerable volume of resources, which entered the real sector
and the banking system, over two years within the frames of financial
programs, as well as with direct participation of the state. This is
quite a big reserve for growth and crediting of economy. Moreover, the
volume of crediting is currently growing and the rates are declining.
I think this is quite natural: the banks are interested in beneficial
crediting. Therefore, the task of economy stimulation, which was
earlier assumed by the state, is now naturally passing to the banks.
We do not rush things and reduce our involvement gradually as markets
start coping with the situation themselves. As the state assures
itself of the market efficiency, steadfast control over it stops and
the state starts fulfilling its direct duties.
The IMF Mission that visited Armenia in September pointed out the
necessity of approaching the rates of the Central Bank with the market
credit rates. What measures are to be taken for it?
If the lower threshold of interest rates is determined by the Central
Bank, the upper one is determined by the market, including by the
supply and demand ratio. Certainly, the difference in the rates should
be comparatively small. The state, in the person of the Central Bank,
uses the mechanisms it possesses; the rest depends on the market.
Despite the complicated financial conditions, the Armenian government
has never cut social expenditures. May it create additional inflation
risks now?
Of course, formal increase of state expenditures, including social
ones, contains elements of possible inflation risks. However, pensions
or allowances will hardly ever be reduced for macroeconomic reasons.
Our task is to retain and increase social expenditures and we do our
best to fulfill it.
The EFF/ECF program agreement signed between Armenia and IMF has a
number of planned reforms on tax administration. Which of them will
you single out?
Practically all of them are important here, as they are included in
the single strategy on raising efficiency of tax administration. We
have completely carried out all these measures and we think that the
IMF Board of Directors will highly assess our work. There are certain
provisions, which are not cancelled, but which are not carried
out completely because of some local factors. Though we receive
recommendations, but one shouldn't neglect the reality and these
factors, because cooperation and support may be provided by our foreign
partners, but the economic strategies, long-term goals and the will to
fulfill them should be provided by the state. The reforms offered by
IMF and other partners among international organizations were and are
included in the number of long-term programs of the government. So,
in terms of strategy our viewpoints coincide. The discussions mostly
cover tactical issues, i.e. how and when to hold these reforms.
According to the same agreement, the state saves half of the taxes
collected more than targeted. Where will these funds be directed?
There is such agreement, and if we set ourselves a task to restrain
the inflationary factors, the money supply reduction may be called
grounded. As regards their further use, the directions of expenditures
will be discussed during the elaboration of the state budget for 2011.
This year no formal changes related to these funds have been introduced
in the budget.
And, finally, please remind the readers what are the IMF loans provided
for and where are they directed?
The funds are provided to the government and the Central Bank for
settlement of macroeconomic stability problems. For the government
these are budget funds, and last time the IMF funds were directly
provided to the budget. I think this year it will be the same. It
should be noted that budget financing is desirable for any government,
as in this case the procedure of the use of the funds is much shorter.
The positive effect for us is even stronger because we shall receive
these restructured funds from the unused funds under the previous
Stand-By program of IMF on more preferential terms.
Thank you.
From: A. Papazian
Aram Gareginyan
ArmInfo
2010-10-21 17:40:00
Interview of Armenian Finance Minister Tigran Davtyan with ArmInfo
news agency
During the program of participation in the annual meetings of Governing
Boards of the World Bank (WB) and the International Monetary Fund
(IMF) in Washington, Armenian Finance Minister Tigran Davtyan agreed
to devote some time to conversation with ArmInfo correspondent.
The minister answered questions about the forthcoming economic policy
of Armenia, including cooperation with IMF and WB
Tell me, please, about the program of the Armenian delegation that
attended the IMF/WB annual meetings on October 7-10.
Over the two days we held over 20 meetings with the representatives of
both IMF and WB, particularly, with experts and heads for our region,
as well as with the IMF and WB leaderships. We discussed the issues
that we were constantly working at with the WB and IMF Permanent
Representatives to Armenia. Each program, no matter whether it is
financial support or a loan, includes a number of reforms to ensure
its effectiveness. Detailed and bilaterally interested discussions
on these programs were held.
The Armenian government has stated its intention to pass from the
expansive economic policy to the restraining one. In Washington such
recommendations to the governments were made by the IMF top management
as well. If the fiscal impetuses are taken out of the economy, will
our private sector be able to replace them with an adequate demand?
Actually, the fiscal impetuses were used during the crisis as
effectively as possible. In the post-crisis period, we gradually
shift accents to restrictive policy, including inflation restraining,
since inflation pressures have turned out to be quite high in 2010.
Certainly, such transfers are not carried out all at once; we shall
gradually change the atmosphere taking into account the general
macroeconomic developments. As for the demand, we managed to attract
a considerable volume of resources, which entered the real sector
and the banking system, over two years within the frames of financial
programs, as well as with direct participation of the state. This is
quite a big reserve for growth and crediting of economy. Moreover, the
volume of crediting is currently growing and the rates are declining.
I think this is quite natural: the banks are interested in beneficial
crediting. Therefore, the task of economy stimulation, which was
earlier assumed by the state, is now naturally passing to the banks.
We do not rush things and reduce our involvement gradually as markets
start coping with the situation themselves. As the state assures
itself of the market efficiency, steadfast control over it stops and
the state starts fulfilling its direct duties.
The IMF Mission that visited Armenia in September pointed out the
necessity of approaching the rates of the Central Bank with the market
credit rates. What measures are to be taken for it?
If the lower threshold of interest rates is determined by the Central
Bank, the upper one is determined by the market, including by the
supply and demand ratio. Certainly, the difference in the rates should
be comparatively small. The state, in the person of the Central Bank,
uses the mechanisms it possesses; the rest depends on the market.
Despite the complicated financial conditions, the Armenian government
has never cut social expenditures. May it create additional inflation
risks now?
Of course, formal increase of state expenditures, including social
ones, contains elements of possible inflation risks. However, pensions
or allowances will hardly ever be reduced for macroeconomic reasons.
Our task is to retain and increase social expenditures and we do our
best to fulfill it.
The EFF/ECF program agreement signed between Armenia and IMF has a
number of planned reforms on tax administration. Which of them will
you single out?
Practically all of them are important here, as they are included in
the single strategy on raising efficiency of tax administration. We
have completely carried out all these measures and we think that the
IMF Board of Directors will highly assess our work. There are certain
provisions, which are not cancelled, but which are not carried
out completely because of some local factors. Though we receive
recommendations, but one shouldn't neglect the reality and these
factors, because cooperation and support may be provided by our foreign
partners, but the economic strategies, long-term goals and the will to
fulfill them should be provided by the state. The reforms offered by
IMF and other partners among international organizations were and are
included in the number of long-term programs of the government. So,
in terms of strategy our viewpoints coincide. The discussions mostly
cover tactical issues, i.e. how and when to hold these reforms.
According to the same agreement, the state saves half of the taxes
collected more than targeted. Where will these funds be directed?
There is such agreement, and if we set ourselves a task to restrain
the inflationary factors, the money supply reduction may be called
grounded. As regards their further use, the directions of expenditures
will be discussed during the elaboration of the state budget for 2011.
This year no formal changes related to these funds have been introduced
in the budget.
And, finally, please remind the readers what are the IMF loans provided
for and where are they directed?
The funds are provided to the government and the Central Bank for
settlement of macroeconomic stability problems. For the government
these are budget funds, and last time the IMF funds were directly
provided to the budget. I think this year it will be the same. It
should be noted that budget financing is desirable for any government,
as in this case the procedure of the use of the funds is much shorter.
The positive effect for us is even stronger because we shall receive
these restructured funds from the unused funds under the previous
Stand-By program of IMF on more preferential terms.
Thank you.
From: A. Papazian