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IMF REACHES AGREEMENT WITH ARMENIA ON REQUEST FOR EXTENDED FUND FACILITY ARRANGEMENT
11:55 05.02.2014
The IMF staff has reached agreement with the Armenian authorities on
their request for a 38-month Extended Fund Facility (EFF) arrangement,
in support of the economic and financial program of the government and
Central Bank of Armenia (CBA) for 2014-17. The agreement also builds
on the policy discussions that took place in Yerevan in September
and December of last year.
Subject to IMF management approval, the staff-level agreement will be
submitted to the Executive Board for its consideration in early March.
Under the arrangement, Armenia would be able to access IMF credit of
up to SDR 82.21 million (approximately US$125 million), subject to
six semi-annual reviews.
The proposed arrangement follows the successful completion of a
three-year program, supported by the IMF under the Extended Fund and
Extended Credit Facility arrangements, which concluded in July 2013
(see Press Release No.13/242). SDR 266.80 million (approximately
US$410 million) were disbursed under these two arrangements.
Mark Horton, IMF Mission Chief for Armenia, issued the following
statement today in Washington:
"The objectives of the IMF-supported program that concluded last July
were largely achieved. These included restoring fiscal and external
sustainability, preserving financial stability, restoring growth,
and reducing poverty. Key achievements included reestablishing
growth after a 14 percent contraction in 2009, attaining significant
consolidation of fiscal and external current account deficits, and
advancing structural reforms in several areas.
"Key challenges remain, however, in terms of sustaining stabilization,
reducing vulnerabilities, and enhancing medium-term growth. Inflation
and growth remain volatile, growth slowed significantly in 2013,
and the external current account deficit and dollarization continue
to be high, so that Armenia is vulnerable to shocks. Poverty and
unemployment also remain high, and further reforms are needed to
support and strengthen growth and continue Armenia's transformation
into a dynamic, emerging market economy.
"In light of these challenges, the authorities have requested a
new IMF arrangement. Key objectives are to safeguard sound public
finances and provide more space for growth-enhancing and poverty
reducing spending, to continue monetary and financial sector policies
that strengthen resilience and buffers, and to promote greater
competition, competitiveness, and regional integration, and thereby,
higher investment, exports, and growth.
"In particular, after two years of significant fiscal overperformance,
due both to underspending on major foreign-financed infrastructure
projects and gains in tax revenues, fiscal policy is expected to
provide a stimulus in 2014, as additional domestic resources will
be devoted to capital outlays, and civil service wages and pensions
are increased after several years of erosion. The headline deficit
(excluding a one-off transfer) is expected to increase from less than
1.0 percent of GDP in 2013 (preliminary) to 2.3 percent in 2014,
before coming back down to 2.0 percent in 2015 and 1.8 percent in
2016-17, a level at which public debt will begin to be reduced.
Revenue increases will contribute to a reduction of outstanding tax
credits in 2015, and in 2016-17, to fiscal consolidation.
"Monetary policy efforts under the program will continue to aim at
keeping inflation within the CBA's inflation target range of 4±1.5
percent, while strengthening the inflation-targeting framework through
improved communications and enhanced modeling. Program targets will
move gradually away from monetary aggregates to inflation outcomes.
The CBA is expected to continue its current exchange rate policy,
allowing the dram to float, but using opportunities to buy foreign
exchange when possible while also providing foreign exchange liquidity
when need to avoid abrupt changes in the exchange rate. The program
will target continuing strong coverage of foreign exchange reserves.
"Financial sector policies will aim at strengthening resilience,
risk assessment and mitigation, and supervision, particularly in
light of the high level of dollarization. The launching of the new
pension system in early 2014 is expected to provide an impulse to
financial sector development; program measures in other areas will
support financial sector deepening.
"Further, decisive structural reforms are needed to complete Armenia's
post-crisis transformation from a construction-led growth model to a
more open, integrated, and competitive emerging market. These reforms
would help diversify the economy and make growth less volatile. The
authorities have laid out a comprehensive approach in their new Armenia
Development Strategy 2014-25 , and the new program would support
implementation of this strategy by targeting structural measures
that further improve the business climate, strengthen institutions,
improve connectivity and competition, create a stronger environment
for foreign direct investment, and tackle key risks, most notably
in the energy sector. These efforts are expected to lead to higher
investment and exports and contribute to a further adjustment of
the external current account deficit--to 6 1/2 percent of GDP in
2017--thereby reducing vulnerability.
"Risks to program exist, but they are manageable. Downside risks
include adverse geopolitical events and external shocks, including
a weakening of inflows in the context of a protracted slowdown in
Russia. The authorities' sound policy framework, efforts to further
build buffers, and commitment to a strong structural reform agenda
are important ways to mitigate risks."
http://www.armradio.am/en/2014/02/05/imf-reaches-agreement-with-armenia-on-request-for-extended-fund-facility-arrangement/
From: Emil Lazarian | Ararat NewsPress
11:55 05.02.2014
The IMF staff has reached agreement with the Armenian authorities on
their request for a 38-month Extended Fund Facility (EFF) arrangement,
in support of the economic and financial program of the government and
Central Bank of Armenia (CBA) for 2014-17. The agreement also builds
on the policy discussions that took place in Yerevan in September
and December of last year.
Subject to IMF management approval, the staff-level agreement will be
submitted to the Executive Board for its consideration in early March.
Under the arrangement, Armenia would be able to access IMF credit of
up to SDR 82.21 million (approximately US$125 million), subject to
six semi-annual reviews.
The proposed arrangement follows the successful completion of a
three-year program, supported by the IMF under the Extended Fund and
Extended Credit Facility arrangements, which concluded in July 2013
(see Press Release No.13/242). SDR 266.80 million (approximately
US$410 million) were disbursed under these two arrangements.
Mark Horton, IMF Mission Chief for Armenia, issued the following
statement today in Washington:
"The objectives of the IMF-supported program that concluded last July
were largely achieved. These included restoring fiscal and external
sustainability, preserving financial stability, restoring growth,
and reducing poverty. Key achievements included reestablishing
growth after a 14 percent contraction in 2009, attaining significant
consolidation of fiscal and external current account deficits, and
advancing structural reforms in several areas.
"Key challenges remain, however, in terms of sustaining stabilization,
reducing vulnerabilities, and enhancing medium-term growth. Inflation
and growth remain volatile, growth slowed significantly in 2013,
and the external current account deficit and dollarization continue
to be high, so that Armenia is vulnerable to shocks. Poverty and
unemployment also remain high, and further reforms are needed to
support and strengthen growth and continue Armenia's transformation
into a dynamic, emerging market economy.
"In light of these challenges, the authorities have requested a
new IMF arrangement. Key objectives are to safeguard sound public
finances and provide more space for growth-enhancing and poverty
reducing spending, to continue monetary and financial sector policies
that strengthen resilience and buffers, and to promote greater
competition, competitiveness, and regional integration, and thereby,
higher investment, exports, and growth.
"In particular, after two years of significant fiscal overperformance,
due both to underspending on major foreign-financed infrastructure
projects and gains in tax revenues, fiscal policy is expected to
provide a stimulus in 2014, as additional domestic resources will
be devoted to capital outlays, and civil service wages and pensions
are increased after several years of erosion. The headline deficit
(excluding a one-off transfer) is expected to increase from less than
1.0 percent of GDP in 2013 (preliminary) to 2.3 percent in 2014,
before coming back down to 2.0 percent in 2015 and 1.8 percent in
2016-17, a level at which public debt will begin to be reduced.
Revenue increases will contribute to a reduction of outstanding tax
credits in 2015, and in 2016-17, to fiscal consolidation.
"Monetary policy efforts under the program will continue to aim at
keeping inflation within the CBA's inflation target range of 4±1.5
percent, while strengthening the inflation-targeting framework through
improved communications and enhanced modeling. Program targets will
move gradually away from monetary aggregates to inflation outcomes.
The CBA is expected to continue its current exchange rate policy,
allowing the dram to float, but using opportunities to buy foreign
exchange when possible while also providing foreign exchange liquidity
when need to avoid abrupt changes in the exchange rate. The program
will target continuing strong coverage of foreign exchange reserves.
"Financial sector policies will aim at strengthening resilience,
risk assessment and mitigation, and supervision, particularly in
light of the high level of dollarization. The launching of the new
pension system in early 2014 is expected to provide an impulse to
financial sector development; program measures in other areas will
support financial sector deepening.
"Further, decisive structural reforms are needed to complete Armenia's
post-crisis transformation from a construction-led growth model to a
more open, integrated, and competitive emerging market. These reforms
would help diversify the economy and make growth less volatile. The
authorities have laid out a comprehensive approach in their new Armenia
Development Strategy 2014-25 , and the new program would support
implementation of this strategy by targeting structural measures
that further improve the business climate, strengthen institutions,
improve connectivity and competition, create a stronger environment
for foreign direct investment, and tackle key risks, most notably
in the energy sector. These efforts are expected to lead to higher
investment and exports and contribute to a further adjustment of
the external current account deficit--to 6 1/2 percent of GDP in
2017--thereby reducing vulnerability.
"Risks to program exist, but they are manageable. Downside risks
include adverse geopolitical events and external shocks, including
a weakening of inflows in the context of a protracted slowdown in
Russia. The authorities' sound policy framework, efforts to further
build buffers, and commitment to a strong structural reform agenda
are important ways to mitigate risks."
http://www.armradio.am/en/2014/02/05/imf-reaches-agreement-with-armenia-on-request-for-extended-fund-facility-arrangement/
From: Emil Lazarian | Ararat NewsPress