Tweet
Global Insight
December 12, 2012
Completion of IMF programme review allows payment of new tranche for Armenia
by Venla Sipila
The Executive Board of the International Monetary Fund (IMF) has
completed its fifth review of the performance of the Armenian economy
under its current assistance programmes supported by the Extended Fund
Facility (EFF) and the Extended Credit Facility (ECF). The Board
concluded its Article IV Consultations with Armenia. It also approved
a request for a waiver related to Armenia's lacking performance on its
net official external exchange reserves. Indeed, the Board notes how,
although policies under the programme have been largely conducted
according to plan, Armenia's net international reserves succumbed to
pressure earlier in the year, and the Central Bank of Armenia (CBA)
had to intervene in the currency markets in order to secure financial
stability. Some of the reserve losses incurred under the dram support
period were later recovered, but it has not yet been feasible to fully
restore the reserves. In addition, the Fund notes that the wide
current-account deficit presents a key vulnerability for Armenia.
Similarly, the high degree of dollarisation also adds to financial
vulnerability. Finally, the IMF commends the Armenian authorities for
progress in fiscal consolidation, while urging increasing attention to
a strategy to increase revenues. This is because funds are needed for
higher social spending and investments, at the same time as the budget
deficit and debt growth need to be further suppressed.
Significance:The completion of the review allows for Armenia to
withdraw a new disbursement of SDR33.5 million (some USD51.4 million),
bringing total payments under the current programs to SDR2118 million.
The current three-year development programmes were approved in June
2012, and the related credits total SDR266.8 million. It is extremely
important for Armenia to adhere to the IMF's advice. First, the
reforms supported by the Fund programmes are necessary in order to
increase competitiveness and to strengthen the business environment -
ultimately securing adequate growth potential in the long-term.
Second, taking into account the high external financing needs, and
taking note of the recent dram weakening pressures, an IMF credit
facility is crucially important also in order to secure financial
stability and adequate external liquidity and solvency.
December 12, 2012
Completion of IMF programme review allows payment of new tranche for Armenia
by Venla Sipila
The Executive Board of the International Monetary Fund (IMF) has
completed its fifth review of the performance of the Armenian economy
under its current assistance programmes supported by the Extended Fund
Facility (EFF) and the Extended Credit Facility (ECF). The Board
concluded its Article IV Consultations with Armenia. It also approved
a request for a waiver related to Armenia's lacking performance on its
net official external exchange reserves. Indeed, the Board notes how,
although policies under the programme have been largely conducted
according to plan, Armenia's net international reserves succumbed to
pressure earlier in the year, and the Central Bank of Armenia (CBA)
had to intervene in the currency markets in order to secure financial
stability. Some of the reserve losses incurred under the dram support
period were later recovered, but it has not yet been feasible to fully
restore the reserves. In addition, the Fund notes that the wide
current-account deficit presents a key vulnerability for Armenia.
Similarly, the high degree of dollarisation also adds to financial
vulnerability. Finally, the IMF commends the Armenian authorities for
progress in fiscal consolidation, while urging increasing attention to
a strategy to increase revenues. This is because funds are needed for
higher social spending and investments, at the same time as the budget
deficit and debt growth need to be further suppressed.
Significance:The completion of the review allows for Armenia to
withdraw a new disbursement of SDR33.5 million (some USD51.4 million),
bringing total payments under the current programs to SDR2118 million.
The current three-year development programmes were approved in June
2012, and the related credits total SDR266.8 million. It is extremely
important for Armenia to adhere to the IMF's advice. First, the
reforms supported by the Fund programmes are necessary in order to
increase competitiveness and to strengthen the business environment -
ultimately securing adequate growth potential in the long-term.
Second, taking into account the high external financing needs, and
taking note of the recent dram weakening pressures, an IMF credit
facility is crucially important also in order to secure financial
stability and adequate external liquidity and solvency.