By Emil Danielyan and Atom Markarian
The International Monetary Fund has formally disbursed a fresh $14 million loan to Armenia in a further endorsement of its government’s policies accompanied by robust economic growth and increased fiscal discipline. A senior IMF official was quoted on Tuesday as praising the country’s “very strong economic performance,” while Armenian Finance and Economy Minister Vartan Khachatrian said his government will continue to borrow from the fund.
The money in question is the fifth installment of the IMF’s $100 million Poverty Reduction and Growth Facility (PRGF), a three-year lending program launched in May 2001. Its disbursement, approved by the IMF’s executive board in Washington late Monday, brought to approximately $72 million the total amount of low-interest funds secured by Armenia under the scheme.
"The Armenian authorities are to be commended for the satisfactory implementation of their PRGF-supported program,” Agustin Carstens, the IMF’s deputy managing director, said in a statement. “Prudent macroeconomic policies and structural reforms have contributed to a continued very strong economic performance, with growth exceeding expectations, low inflation, and declining public debt ratios.”
The praise echoes remarks made by IMF director Horst Koehler during a visit to Yerevan on November 10. “The country is on the right track and should just stay the course of reforms,” Koehler said after talks with President Robert Kocharian and other Armenian officials.
Like the IMF chief, Carstens stressed that the Armenian authorities should further boost collection of taxes to considerably increase their social spending and must improve the business environment by tackling rampant corruption in earnest. “Prompt and vigorous implementation of an effective [anti-corruption] strategy will be essential to improve the business climate and income distribution, and foster broad-based and sustained economic development,” he said.
The IMF official also urged the authorities to press ahead their recently unveiled plans for a major overhaul of the loss-making public utilities which remain a serious drain on Armenia’s scarce public resources.
The fund’s positive stance gives weight to the credibility of official figures that show the Armenian economy growing at a record-high rate of 15 percent in the first nine months of this year. Officials announced on Tuesday that Armenia has become the 54th member of the IMF’s “special data dissemination standard” which will put its economic statistics, often dismissed as fraudulent by the Armenian opposition, under closer international scrutiny.
“From now on both foreign investors and international finance organizations will be confident that the statistical data publicized by the Republic of Armenia are reliable,” said Tigran Sarkisian, chairman of the Central Bank of Armenia (CBA).
The CBA remains the main recipient of IMF loans which are designed to boost Armenia’s hard currency reserves and thereby reinforce its macroeconomic stability. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5-year grace period. They are strictly tied to tight monetary and fiscal policies championed by the IMF throughout the world.
Carstens indicated that the CBA must be ready to take “preemptive action” if inflation surpasses the planned annual limit of 3 percent. Armenia’s consumer price index has already registered a higher-than-expected increase this year that was largely triggered by a surge in bread price this summer. It could go up further after a planned rise in the utility prices early next year.
Khachatrian told reporters that the Armenian authorities will continue to rely on IMF loans after the PRGF’s completion scheduled for next July. He said Yerevan counts on them for repaying its debts to external lenders, including the IMF itself.
“As a result of this program we will get additional cheap funds to repay our outstanding debts to the IMF,” he said.
The government’s draft budget for 2004 sets aside $58 million for external debt servicing. Of that $34 million is to be paid to the IMF.
(RFE/RL photo: Koehler praising Armenia during the Yerevan visit.)