By Emil Danielyan
The World Bank said on Tuesday that it will soon unblock release of $35 million in budgetary loans to Armenia delayed last autumn over a worse-than-expected tax collection and the failure of the energy sector privatization.
The bank said it is awaiting the International Monetary Fund’s go-ahead for the disbursement of the second $15 million tranche of its 2001 Structural Adjustment Credit (SAC IV). A high-level delegation from the IMF is due in Yerevan later this month.
“The second tranche of SAC IV is awaiting the assessment of the overall macroeconomic performance by the forthcoming IMF Mission,” the World Bank said in a statement. “We are sanguine that a satisfactory resolution will be reached regarding the remaining SAC IV tranches during early 2002.”
The IMF effectively blocked the release of the second tranche last October after a major shortfall in third-quarter government revenues. The Fund did not change its position after the tax authorities posted better results in the course of the fourth quarter. It now insists that the government must take “additional fiscal measures” in order to be able to meet its higher revenue target for this year.
Finance and Economy Minister Vartan Khachatrian blasted the IMF over its tough stance late last month. His harsh criticism of the IMF was on Tuesday rebutted by the World Bank representative in Yerevan who said bluntly that the government should do a better job of tackling widespread tax evasion instead of blaming others.
“The World Bank is not a taxpayer for Armenia,” the official, Owaise Saadat, told reporters. “Please ask your taxpayers to pay for the budget.”
“Our money is conditional on structural reforms. We would release the tranche when the conditions are met,” Saadat added.
The World Bank statement, however, noted that the Armenian government has “met the SAC IV conditions.” But it cautioned that the authorities’ “fragile tax base continues to be a major area of concern.”
The third final SAC instalment worth $20 million was pegged to the privatization of the sell-off of state-run power grids. Two government attempts to privatize them failed last year amid a lack of interest from foreign investors.
The World Bank blamed the privatization flop on “unexpected world market conditions” and endorsed government plans to lease the electricity distribution networks to a foreign energy company.
The delayed loan tranches were included in the government’s 2001 budget. Their release will allow the finance ministry to clear public sector wage arrears.
World Bank loans have covered nearly half of Armenia’s budget deficits for the past several years. But the bank will finance just over one quarter of this year’s $73 million deficit. The cabinet of Prime Minister Andranik Markarian wants to reduce its dependence on external borrowing in line with IMF recommendations.
The World Bank has been Armenia’s single largest creditor and is currently implementing 14 different loan projects in amounting to $295 million. “Overall, the World Bank is satisfied with its close and fruitful partnership with the government of Armenia as evidenced by…progress in key structural reforms, lending operations, and the collaborative interactions on key economic policies and programs,” its statement said.