By Anush Martirosian
The World Bank will likely allocate hundreds of millions of dollars in additional loans to Armenia to help its government mitigate negative effects of the global financial crisis on the domestic economy, a senior bank official said on Tuesday.
Armenia’s banking sector has so far been barely affected by the credit crunch that plagued leading finance corporations in the United States and Europe earlier this year. However, there are growing indications that the crisis is reflecting negatively on its robust economic growth, which slowed into single digits in the fourth quarter of this year.
The slowdown has been particularly sharp in construction, a key driving force behind the growth in recent years. Another major sector of the Armenian economy, mining, has been hit even harder by the recent plunge in international prices of copper and other non-ferrous metals. Some economists expect a major fall in multimillion-dollar cash remittances from abroad received by a significant part of the country’s population.
The Armenian government says it can offset these knock-on effects by launching large-scale infrastructure projects and making it much easier for local firms to obtain low-interest loans. The government hopes to secure up to $250 million in loans from the World Bank that would be made available to small and medium-sized businesses.
The World Bank, according to the head of its Yerevan office, Aristomene Varoudakis, is ready to provide at least $100 million of such assistance. Varoudakis told a news conference that its first installment will likely be disbursed early next year.
“We are working very closely with the government so as to design appropriate programs to counter the impact of the financial crisis on Armenia and are at the same time thinking about how to make the economy more resilient,” he said, adding that negotiations between them are still going on.
Prime Minister Tigran Sarkisian has said that his government expects the World Bank to provide it with a total of $800 million in low-interest loans in the next three or four years.
Varoudakis indicated that the government is well placed to get an package aid of this scale. He said the World Bank’s board of directors could approve it next March.
(Photolur photo: Aristomene Varoudakis.)