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IMF APPROVES USD84-MIL. LOAN INSTALMENT TO ARMENIA AFTER POSITIVE REVIEW
Global Insight
July 9, 2013
by Lilit Gevorgyan
Armenia will receive an additional USD84 million (55 million Special
Drawing Rights) from the International Monetary Fund (IMF). According
to the latest press release from the IMF, Armenian government qualified
for the final instalment of its USD407.2-million (SDR 266.8-million)
IMF loan, following a successful conclusion of the review by the IMF
Executive Board of Armenia's economic performance.
IMF stated that the Armenian government largely delivered on criteria
under the Fund's Extended Fund Facility (EFF) and Extended Credit
Facility (ECF) arrangements. The assistance programme, which started in
2010, will conclude in September 2013. The Board commended Armenia's
monetary and fiscal policies, noting that the Central Bank of Armenia
(CBA) permitted greater flexibility of the dram over the past 12
months, as recommended during the last IMF review.
Tax revenues have also increased due to more rigorous tax collection.
The CBA managed to keep inflation below target. Armenia's overall
economic growth remained healthy, with the GDP expanding by 4.7%
in 2011, 7.2% in 2012 and projected to post strong growth in 2013. A
healthy economic performance has helped to narrow the fiscal deficit
since 2010, leading to fiscal sustainability. The Board also reported
that Armenia's banking system remains sound, but urged the government
to continue with structural reforms to allow further development of
the private sector, and reduce poverty.
Significance:The Armenian government has managed to make significant
progress in terms of controlling and reducing its fiscal deficit and
achieved health economic growth numbers in the past three years, as
evidenced by the latest IMF assessment. However, the economy remains
highly vulnerable due to both domestic and external factors. As
highlighted by the IMF, the economic expansion since 2010 was largely
due to high metal prices, good harvests and high metal prices.
However, 2013 could be a challenging year, considering weak demand
for Armenian exports of metal. Due to adverse weather conditions,
the harvest is expected to be poor this year. The increase in energy
prices since early 2013 and resultant inflation is likely to curb
one of the best performing sectors of the economy, private consumption.
Armenia's external financing needs remain very high. This is putting
more pressure on the government to pursue the long overdue regulatory
improvements. Most importantly, this involves fighting corruption
and creating a better environment to unlock the potential of small
and medium-sized enterprises (SMEs). Strengthening SMEs, among others
could help to end the ongoing wealth polarisation and offer an avenue
to poverty reduction, as advised by the IMF.
Global Insight
July 9, 2013
by Lilit Gevorgyan
Armenia will receive an additional USD84 million (55 million Special
Drawing Rights) from the International Monetary Fund (IMF). According
to the latest press release from the IMF, Armenian government qualified
for the final instalment of its USD407.2-million (SDR 266.8-million)
IMF loan, following a successful conclusion of the review by the IMF
Executive Board of Armenia's economic performance.
IMF stated that the Armenian government largely delivered on criteria
under the Fund's Extended Fund Facility (EFF) and Extended Credit
Facility (ECF) arrangements. The assistance programme, which started in
2010, will conclude in September 2013. The Board commended Armenia's
monetary and fiscal policies, noting that the Central Bank of Armenia
(CBA) permitted greater flexibility of the dram over the past 12
months, as recommended during the last IMF review.
Tax revenues have also increased due to more rigorous tax collection.
The CBA managed to keep inflation below target. Armenia's overall
economic growth remained healthy, with the GDP expanding by 4.7%
in 2011, 7.2% in 2012 and projected to post strong growth in 2013. A
healthy economic performance has helped to narrow the fiscal deficit
since 2010, leading to fiscal sustainability. The Board also reported
that Armenia's banking system remains sound, but urged the government
to continue with structural reforms to allow further development of
the private sector, and reduce poverty.
Significance:The Armenian government has managed to make significant
progress in terms of controlling and reducing its fiscal deficit and
achieved health economic growth numbers in the past three years, as
evidenced by the latest IMF assessment. However, the economy remains
highly vulnerable due to both domestic and external factors. As
highlighted by the IMF, the economic expansion since 2010 was largely
due to high metal prices, good harvests and high metal prices.
However, 2013 could be a challenging year, considering weak demand
for Armenian exports of metal. Due to adverse weather conditions,
the harvest is expected to be poor this year. The increase in energy
prices since early 2013 and resultant inflation is likely to curb
one of the best performing sectors of the economy, private consumption.
Armenia's external financing needs remain very high. This is putting
more pressure on the government to pursue the long overdue regulatory
improvements. Most importantly, this involves fighting corruption
and creating a better environment to unlock the potential of small
and medium-sized enterprises (SMEs). Strengthening SMEs, among others
could help to end the ongoing wealth polarisation and offer an avenue
to poverty reduction, as advised by the IMF.