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Armenian Banks To Get German Guarantees For External Borrowing


By Atom Markarian
In a bid to promote small businesses in Armenia, Germany will provide 7.6 million euros ($8.7 million) worth of financial guarantees to local commercial banks seeking low-interest loans from European lending institutions, officials announced on Tuesday.

A corresponding agreement was signed in Yerevan by Finance and Economy Minister Vartan Khachatrian and Klaus Glaubit, a senior executive from Germany’s government-funded KfW development bank. The Armenian banks eligible for the scheme will be chosen by KfW and external funds attracted by them will be lent to small and medium-sized firms at discount rates.

Khachatrian said the loan guarantees are part of the German government’s 15 million-euro program which was initially due to cover the three South Caucasus countries. But he said Azerbaijan refused to participate in it and the money was divided between Armenia and Georgia.

Glaubit declined to specify reasons for Azerbaijan’s refusal, saying only that it was a result of “certain misunderstandings.” He said another purpose of the lending program is promote inter-bank cooperation in the region.

Germany has provided Armenia with a total of 120 million euros worth of credit and grants over the past ten years. Much of the money has been channeled into the Armenian economy through a special German-Armenian fund. The fund operates a low-interest lending scheme for small businesses handled by local banks. Khachatrian described it as “very efficient,” praising the German government for the support.

As recently as last April, Khachatrian officially accepted the release of 26.5 million euros in fresh German loans and grants. More than a quarter of the sum was due to be spent on the improvement of public services in some Armenian regions.

Few of the Armenian banks have been able to secure cheap credit from German and other European banks. In February, for example, the Yerevan-based Armeconombank received an additional $500,000 from the European Bank for Reconstruction and Development (EBRD) under a program designed to shore up Armenian companies involved in external trade. The first EBRD tranche worth $1 million was allocated to Armeconombank in September 2002.

The Armenian banks may not necessarily be short of cash, however. The chairman of Armenia’s Central Bank, Tigran Sarkisian, revealed earlier this month that many of them increasingly invest abroad in the face of a “risky” domestic business environment. He called the trend a “serious problem.”
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