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States News Service
March 7, 2014 Friday
IMF EXECUTIVE BOARD APPROVES US$127.6 MILLION EXTENDED ARRANGEMENT FOR ARMENIA
WASHINGTON
The following information was released by the International Monetary Fund:
The Executive Board of the International Monetary Fund (IMF) today
approved a 38-month SDR 82.21 million (about US$127.6 million, or 89.4
percent of Armenia's quota) Extended Fund Facility (EFF) arrangement
with the Republic of Armenia to support the authorities' economic
program. The approval enables the disbursement of SDR 11.74 million
(about US$18.2 million), while the remaining amount will be phased
over the duration of the program, subject to semi-annual program
reviews.
The program aims to support a rebound in economic activity, further
progress in poverty reduction, inflation stabilization, and a
reduction in outstanding fiscal and external vulnerabilities.
Following the Executive Board discussion on Armenia, Ms. Nemat Shafik,
Deputy Managing Director and Acting Chair, said:
Armenia's performance under the 201013 Extended Fund Facility and
Extended Credit Facility arrangements was sound. However, growth and
inflation remain volatile, the external current account deficit
continues to be large, and poverty and unemployment are still high.
The new 38-month extended arrangement with the Fund aims to support
the authorities in addressing these challenges and to sustain
Armenia's access to international financial markets.
Fiscal policy will play a central role in the program, supporting
growth in 2014 and reducing the headline deficit over the rest of the
program period to build up policy buffers. Delivering planned revenue
gains and reducing the under execution of the public investment budget
will be essential for successful implementation of the fiscal
strategy. Another key measure in the fiscal area is setting up
institutional structures to monitor and mitigate fiscal risks.
Under the authorities' program, monetary policy will continue to be
framed by inflation targeting in the context of a flexible exchange
rate regime. For the financial sector, policy will be geared towards
promoting resilience to shocks and greater financial deepening.
Growth-enhancing structural reforms will also play a central role in
the new program, given the objective of transforming Armenia into a
dynamic emerging market. In this context, smooth accession to the
Eurasian Customs Union, along with continuing growth of trade and
other links with the European Union, will be essential to achieve
diversification of markets, products, financial flows, and investors.
Risks to the new program appear to be manageable, and Armenia's
repayment capacity remains robust. The authorities have a long track
record of sound macroeconomic policies but maintaining a strong
ownership of the program will be essential to its successful
implementation.
ANNEX
Recent developments:
Despite sound performance under the 201013 IMF-supported program,
challenges to the Armenian economy remain, in terms of macroeconomic
stabilization, reduction of vulnerabilities, and medium-term growth
dynamics. Inflation and growth remain highly volatile, as the growth
slowdown and inflation increase in 2013 have illustrated. The external
current account deficit and dollarization remain high, keeping the
economy vulnerable to shocks. Poverty and unemployment also remain
high, and the transition towards an alternative to the pre-crisis
construction-led growth model has been slow. Armenia took major
financial and trade decisions in 2013, with a 7-year debut Eurobond
issued in September, and the announcement that it would seek accession
the Eurasian Customs Union.
Program Summary
As part of the program, fiscal policy will support the growth recovery
in 2014 by providing a modest stimulus, before moving to a gradual
consolidation stance in 201517. This will place public debt on a
declining path during the program period. Revenue measures will
support the consolidation and also create room for addressing social
and investment needs.
Monetary and exchange rate policies will be guided by the authorities'
framework of inflation targeting and exchange rate flexibility, with
program policies focusing on continued improvements in monetary
operations, communications, and modeling. Financial sector policies
will target implementation of remaining recommendations of the IMF's
2012 Financial Sector Assessment Program (FSAP) Update, which aim to
promote resilience to shocks and greater financial deepening.
Structural reforms will support medium-term growth by targeting
improvements in the business climate, strengthening institutions,
improving connectivity and competition, creating a stronger
environment for private and foreign direct investment, and tackling
key risks, especially in the energy sector.
Barring major shocks, Armenia's balance of payments gaps should close
by the end of the program period and the country should be able to
sustain access to international financial markets, paving the way for
an exit from IMF support, provided that balance of payments
difficulties are resolved, as expected.
Armenia: Selected Economic and Financial Indicators, 200916
2009201020112012 2013201420152016
Act.Act.Act.Prel. EBS/13/75Proj.Proj.Proj.Proj.
National income and prices
Real GDP (percent change) -14.12.24.77.1 5.13.24.34.54.7
Gross domestic product (in billions of drams) 3,1423,4603,7783,998
4,3514,2904,7145,1235,578
Gross domestic product (in millions of U.S. dollars)
8,6489,26010,1429,950 10,36510,54711,21611,60912,039
Gross domestic product per capita (in U.S. dollars)
2,6612,8383,0973,033 3,1533,2083,4053,5173,640
CPI (period average; percent change) 3.57.37.72.5 4.05.85.04.04.0
CPI (end of period; percent change) 6.78.54.73.2 4.05.64.04.04.0
GDP deflator (percent change) 2.67.84.3-1.2 4.04.05.44.04.0
Poverty rate (in percent) 34.135.835.0... ...............
Investment and saving (in percent of GDP)
Investment 33.829.427.022.8 24.523.924.424.925.5
National savings 18.014.616.111.6 14.415.517.318.118.9
Money and credit (end of period)
Reserve money (percent change) 13.8-0.832.31.9 10.329.99.0......
Broad money (percent change) 16.410.623.619.6 15.915.211.3......
Velocity of broad money (end of period) 3.83.83.43.0 2.82.8.........
Commercial banks' 3-month lending rate (in percent) 19.117.720.718.5
...18.3.........
Central government operations (in percent of GDP)
Revenue and grants 20.921.222.122.3 23.223.323.523.323.6
Of which: tax revenue 1/ 16.116.416.718.1 21.722.522.722.723.0
Expenditure 2/ 28.626.225.023.9 25.525.825.925.425.4
Overall balance on a cash basis -7.9-4.6-2.8-1.5 -2.3-2.5-2.3-2.0-1.8
Public and publicly-guaranteed debt (in percent of GDP)
40.239.742.044.0 43.545.445.246.046.2
Share of foreign currency debt (in percent) 88.987.486.886.9
86.484.884.484.484.9
External sector
Exports of goods and services (in millions of U.S. dollars)
1,3361,9372,4072,440 2,6992,5832,7572,9323,123
Imports of goods and services (in millions of U.S. dollars)
-3,683-4,212-4,797-4,907 -5,135-5,022-5,155-5,365-5,596
Exports of goods and services (percent change) -24.045.024.31.4 8.35.86.86.36.5
Imports of goods and services (percent change) -22.414.413.92.3 4.92.32.64.14.3
Current account balance (in percent of GDP) -15.8-14.8-10.9-11.2
-10.0-8.4-7.2-6.8-6.6
FDI (net, in millions of U.S. dollars) 3/ 725562447474 440549413432472
External debt (in percent of GDP) 56.466.471.576.2 76.079.377.077.778.1
o.w. public debt (in percent of GDP) 4/ 35.734.736.438.2 37.638.538.138.839.2
Debt service ratio (in percent of exports of goods and services) 4/
5.44.74.29.8 15.634.110.46.36.7
Gross international reserves (in millions of U.S. dollars)
2,0041,8661,8691,799 1,4672,2532,1932,2782,376
Import cover 5/ 5.74.74.64.3 3.35.24.94.94.9
Nominal effective exchange rate (percent change) 6/ -8.4-2.6-2.8-7.3
Real effective exchange rate (percent change) 6/ -7.51.30.0-6.1
End-of-period exchange rate (dram per U.S. dollar) 378363385.8403.6 405.6
Average exchange rate (dram per U.S. dollar) 363374372.5401.8 406.8
Memorandum item:
Population (in millions) 3.23.33.33.3
Sources: Armenian authorities; and IMF staff estimates and projections.
1/ From 2013, tax revenue includes social contribution.
2/ In 2013 includes 1.5 percent of GDP related to the acquisition by
Gazprom from the government of 20 percent of the shares of
ArmRusGazprom, and the transfer (expenditure) of the same amount from
the government to ArmRusGazprom to liquidate liabilities. Excluding
this transaction, the deficit would amount to 1 percent of GDP.
3/ In 2013, a credit for $155 million is registered in FDI to reflect
the acquisition by Gazprom of 20 percent of the shares of
ArmRusGazprom, while an offseting debit is registered in other capital
(net) to reflect the corresponding reduction in liabilities of the
latter with the former.
4/ Based on public and publicly-guaranteed debt.
5/ Gross international reserves in months of next year's imports of
goods and services, including the SDR holdings.
6/ A positive sign denotes appreciation.
IMF COMMUNICATIONS DEPARTMENT
Public Affairs Media Relations
From: A. Papazian
March 7, 2014 Friday
IMF EXECUTIVE BOARD APPROVES US$127.6 MILLION EXTENDED ARRANGEMENT FOR ARMENIA
WASHINGTON
The following information was released by the International Monetary Fund:
The Executive Board of the International Monetary Fund (IMF) today
approved a 38-month SDR 82.21 million (about US$127.6 million, or 89.4
percent of Armenia's quota) Extended Fund Facility (EFF) arrangement
with the Republic of Armenia to support the authorities' economic
program. The approval enables the disbursement of SDR 11.74 million
(about US$18.2 million), while the remaining amount will be phased
over the duration of the program, subject to semi-annual program
reviews.
The program aims to support a rebound in economic activity, further
progress in poverty reduction, inflation stabilization, and a
reduction in outstanding fiscal and external vulnerabilities.
Following the Executive Board discussion on Armenia, Ms. Nemat Shafik,
Deputy Managing Director and Acting Chair, said:
Armenia's performance under the 201013 Extended Fund Facility and
Extended Credit Facility arrangements was sound. However, growth and
inflation remain volatile, the external current account deficit
continues to be large, and poverty and unemployment are still high.
The new 38-month extended arrangement with the Fund aims to support
the authorities in addressing these challenges and to sustain
Armenia's access to international financial markets.
Fiscal policy will play a central role in the program, supporting
growth in 2014 and reducing the headline deficit over the rest of the
program period to build up policy buffers. Delivering planned revenue
gains and reducing the under execution of the public investment budget
will be essential for successful implementation of the fiscal
strategy. Another key measure in the fiscal area is setting up
institutional structures to monitor and mitigate fiscal risks.
Under the authorities' program, monetary policy will continue to be
framed by inflation targeting in the context of a flexible exchange
rate regime. For the financial sector, policy will be geared towards
promoting resilience to shocks and greater financial deepening.
Growth-enhancing structural reforms will also play a central role in
the new program, given the objective of transforming Armenia into a
dynamic emerging market. In this context, smooth accession to the
Eurasian Customs Union, along with continuing growth of trade and
other links with the European Union, will be essential to achieve
diversification of markets, products, financial flows, and investors.
Risks to the new program appear to be manageable, and Armenia's
repayment capacity remains robust. The authorities have a long track
record of sound macroeconomic policies but maintaining a strong
ownership of the program will be essential to its successful
implementation.
ANNEX
Recent developments:
Despite sound performance under the 201013 IMF-supported program,
challenges to the Armenian economy remain, in terms of macroeconomic
stabilization, reduction of vulnerabilities, and medium-term growth
dynamics. Inflation and growth remain highly volatile, as the growth
slowdown and inflation increase in 2013 have illustrated. The external
current account deficit and dollarization remain high, keeping the
economy vulnerable to shocks. Poverty and unemployment also remain
high, and the transition towards an alternative to the pre-crisis
construction-led growth model has been slow. Armenia took major
financial and trade decisions in 2013, with a 7-year debut Eurobond
issued in September, and the announcement that it would seek accession
the Eurasian Customs Union.
Program Summary
As part of the program, fiscal policy will support the growth recovery
in 2014 by providing a modest stimulus, before moving to a gradual
consolidation stance in 201517. This will place public debt on a
declining path during the program period. Revenue measures will
support the consolidation and also create room for addressing social
and investment needs.
Monetary and exchange rate policies will be guided by the authorities'
framework of inflation targeting and exchange rate flexibility, with
program policies focusing on continued improvements in monetary
operations, communications, and modeling. Financial sector policies
will target implementation of remaining recommendations of the IMF's
2012 Financial Sector Assessment Program (FSAP) Update, which aim to
promote resilience to shocks and greater financial deepening.
Structural reforms will support medium-term growth by targeting
improvements in the business climate, strengthening institutions,
improving connectivity and competition, creating a stronger
environment for private and foreign direct investment, and tackling
key risks, especially in the energy sector.
Barring major shocks, Armenia's balance of payments gaps should close
by the end of the program period and the country should be able to
sustain access to international financial markets, paving the way for
an exit from IMF support, provided that balance of payments
difficulties are resolved, as expected.
Armenia: Selected Economic and Financial Indicators, 200916
2009201020112012 2013201420152016
Act.Act.Act.Prel. EBS/13/75Proj.Proj.Proj.Proj.
National income and prices
Real GDP (percent change) -14.12.24.77.1 5.13.24.34.54.7
Gross domestic product (in billions of drams) 3,1423,4603,7783,998
4,3514,2904,7145,1235,578
Gross domestic product (in millions of U.S. dollars)
8,6489,26010,1429,950 10,36510,54711,21611,60912,039
Gross domestic product per capita (in U.S. dollars)
2,6612,8383,0973,033 3,1533,2083,4053,5173,640
CPI (period average; percent change) 3.57.37.72.5 4.05.85.04.04.0
CPI (end of period; percent change) 6.78.54.73.2 4.05.64.04.04.0
GDP deflator (percent change) 2.67.84.3-1.2 4.04.05.44.04.0
Poverty rate (in percent) 34.135.835.0... ...............
Investment and saving (in percent of GDP)
Investment 33.829.427.022.8 24.523.924.424.925.5
National savings 18.014.616.111.6 14.415.517.318.118.9
Money and credit (end of period)
Reserve money (percent change) 13.8-0.832.31.9 10.329.99.0......
Broad money (percent change) 16.410.623.619.6 15.915.211.3......
Velocity of broad money (end of period) 3.83.83.43.0 2.82.8.........
Commercial banks' 3-month lending rate (in percent) 19.117.720.718.5
...18.3.........
Central government operations (in percent of GDP)
Revenue and grants 20.921.222.122.3 23.223.323.523.323.6
Of which: tax revenue 1/ 16.116.416.718.1 21.722.522.722.723.0
Expenditure 2/ 28.626.225.023.9 25.525.825.925.425.4
Overall balance on a cash basis -7.9-4.6-2.8-1.5 -2.3-2.5-2.3-2.0-1.8
Public and publicly-guaranteed debt (in percent of GDP)
40.239.742.044.0 43.545.445.246.046.2
Share of foreign currency debt (in percent) 88.987.486.886.9
86.484.884.484.484.9
External sector
Exports of goods and services (in millions of U.S. dollars)
1,3361,9372,4072,440 2,6992,5832,7572,9323,123
Imports of goods and services (in millions of U.S. dollars)
-3,683-4,212-4,797-4,907 -5,135-5,022-5,155-5,365-5,596
Exports of goods and services (percent change) -24.045.024.31.4 8.35.86.86.36.5
Imports of goods and services (percent change) -22.414.413.92.3 4.92.32.64.14.3
Current account balance (in percent of GDP) -15.8-14.8-10.9-11.2
-10.0-8.4-7.2-6.8-6.6
FDI (net, in millions of U.S. dollars) 3/ 725562447474 440549413432472
External debt (in percent of GDP) 56.466.471.576.2 76.079.377.077.778.1
o.w. public debt (in percent of GDP) 4/ 35.734.736.438.2 37.638.538.138.839.2
Debt service ratio (in percent of exports of goods and services) 4/
5.44.74.29.8 15.634.110.46.36.7
Gross international reserves (in millions of U.S. dollars)
2,0041,8661,8691,799 1,4672,2532,1932,2782,376
Import cover 5/ 5.74.74.64.3 3.35.24.94.94.9
Nominal effective exchange rate (percent change) 6/ -8.4-2.6-2.8-7.3
Real effective exchange rate (percent change) 6/ -7.51.30.0-6.1
End-of-period exchange rate (dram per U.S. dollar) 378363385.8403.6 405.6
Average exchange rate (dram per U.S. dollar) 363374372.5401.8 406.8
Memorandum item:
Population (in millions) 3.23.33.33.3
Sources: Armenian authorities; and IMF staff estimates and projections.
1/ From 2013, tax revenue includes social contribution.
2/ In 2013 includes 1.5 percent of GDP related to the acquisition by
Gazprom from the government of 20 percent of the shares of
ArmRusGazprom, and the transfer (expenditure) of the same amount from
the government to ArmRusGazprom to liquidate liabilities. Excluding
this transaction, the deficit would amount to 1 percent of GDP.
3/ In 2013, a credit for $155 million is registered in FDI to reflect
the acquisition by Gazprom of 20 percent of the shares of
ArmRusGazprom, while an offseting debit is registered in other capital
(net) to reflect the corresponding reduction in liabilities of the
latter with the former.
4/ Based on public and publicly-guaranteed debt.
5/ Gross international reserves in months of next year's imports of
goods and services, including the SDR holdings.
6/ A positive sign denotes appreciation.
IMF COMMUNICATIONS DEPARTMENT
Public Affairs Media Relations
From: A. Papazian