By Harry Tamrazian in Yerevan
The mission of the International Monetary Fund (IMF) in Armenia released a statement on Thursday on the results of its discussions with the Armenian government earlier this month in Yerevan. The IMF staff team and the Armenian government have reached an understanding on a program and a policy memorandum for the July 2002-June 2003 period, that will be supported by the Poverty Reduction and Growth Facility (PRGF) loan.
The agreement between the IMF mission and the Armenian government is still at a preliminary stage. It will be presented to the IMF Executive Board for final consideration in the next few weeks, after the IMF staff prepares a report. The Executive Board's approval would enable Armenia to draw the second and the third tranches under the program, equivalent to US$27 million.
The IMF staff team evaluated Armenia's economic performance positively, noting that the economy had a strong performance in 2001, with real GDP growth reaching 9 percent, annual inflation remaining stable at 3 percent, foreign exchange reserves at a comfortable level and fiscal and current account deficits narrowing.
The IMF mission also welcomes the higher level of tax collection during the second quarter of 2002 and the Armenian government's decision to speed up privatization and reform in energy, water and irrigation sectors. The Fund had criticized the Armenian government earlier for its poor performance in collecting taxes and for lack of reforms in the energy sector, resulting in a delay in disbursement of two loan tranches worth $27 million, which are part of the $87 million Poverty Reduction and Growth Facility loan.
The IMF statement also said that the discussions with the Armenian
authorities focused on measures to continue improving tax and customs
administration, ensure the transparency of public sector operations,
release additional resources for spending on social needs, eliminate
expenditure arrears, and create the conditions for the banking system to sustain the process of economic growth.
The IMF mission also notes that the economic program agreed upon with the Armenian government for next year addresses the challenges underlined by the Fund. Armenian authorities also promised the IMF visiting staff team that they will implement program measures forcefully, to ensure the efficient functioning of the legal system, fight corruption and tax evasion and move quickly to resolve the situation of those commercial banks that have been put under temporary
administration, and lay the foundation for a modern deposit insurance system.
The Armenian government also assured the IMF staff team during their discussion that the privatization of state enterprises and the restructuring of Armenia's external debt will be transparent.