By Emil Danielyan
The World Bank will disburse up to $220 million in additional credit within the next four years to promote an improved business climate, better governance and more efficient public services in Armenia, bank officials said on Friday. They also announced the release of three separate infrastructure loans worth $31 million.
The larger sum is part of a new “country assistance strategy” (CAS) approved by the World Bank’s Board of Executive Directors in Washington the previous night. One of the document’s main declared goals is to render economic growth in Armenia “more pro-poor” with “special attention” to be the development of rural areas.
In a statement circulated by its Yerevan office, the World Bank praised the country’s “strong economic performance” since 2000, but cautioned that many impoverished Armenians have yet to feel its benefits. “Growth has been uneven, with poor rural regions and segments of population falling further behind,” the statement said. “Access to high quality education, health care and basic services is restricted.”
Funding under the new CAS is to start from July 1 and run through 2008. It is primarily aimed at spurring the creation of new badly needed jobs and improving the state system of social security which presently fails to meet the basic needs of the low-income population. The amount of promised loans is largely in line with the expectations of the Armenian government made public by Finance and Economy Minister Vartan Khachatrian last week.
The low-interest loans, which are repayable in 40 years from their disbursement, remain a major source of funding for Armenia’s budget deficit and infrastructure projects. The government has already borrowed $164 million under the World Bank’s previous CAS launched in 2002. The bank board decided to reward its economic policies with three more loans before the lending program’s expiry this month.
The biggest of them, worth $19 million, is designed to “modernize” the country’s cash-strapped health sector and make it more accessible to the population. It will support, in particular, development of a system of “family medicine” involving special doctors and nurses to be embedded with local communities. About a thousand medical personnel are to be trained under the program. The money will also be used for the purchase of new medical equipment and reform of hospital management.
The two other loans, worth $6.75 million and $5.15 million, will be channeled into the irrigation network and social services respectively. They will bring to $820 million the total amount of credit extended to Armenia by the World Bank so far. The bank’s statement said the assistance has yielded positive results, listing among other things the rehabilitation of 760 kilometers of roads, 4,000 kilometers of irrigation canals and much of Yerevan’s water distribution network. The latter has been revamped with a $30 million loan provided in 1999.
The use of that loan has been investigated and seriously questioned by an ad hoc commission of the Armenian parliament, however. The commission led by deputy speaker Vahan Hovannisian concluded in a preliminary report in March that the Municipal Development Project (MDP) has failed to achieve its main objectives, alleging widespread fraud and mismanagement.
Another parliament body, the Audit Chamber, has alleged the misuse of a World Bank loan meant to strengthen the Armenian judiciary. Parliament speaker Artur Baghdasarian has demanded a criminal investigation into the Chamber’s findings.
Both the government and the World Bank office in Yerevan have rejected the allegations as unfounded.