The Armenian government is seeing the first signs of economic recovery in the country and has no plans yet to seek additional anti-crisis loans from multilateral lending institutions, according to Economy Minister Nerses Yeritsian.
“We already have a fairly large [credit] portfolio in these two structures,” Yeritsian told RFE/RL on the sidelines of this week’s annual meetings in Istanbul of the governing bodies of the World Bank and the International Monetary Fund.
“What we need now is to be able to develop our capacities in a way that would allow us to absorb those resources. Right now have trouble spending resources because [business] projects are developed slowly,” he said.
The Armenian authorities have secured more than $1.5 billion in loans from the IMF, the World Bank and other external sources to reduce the highly negative impact of the global recession on the domestic economy. The IMF alone approved a $830 million stand-by credit for Yerevan earlier this year. About half of the sum, mainly designed to boost Armenia’s external reserves and finance its increased budget deficit, has already been disbursed.
“There is no talk of new money,” Ratna Sahay, deputy director of the IMF’s Middle East and Central Asia department, told RFE/RL in Istanbul, commenting on ongoing talks between Armenia and the Washington-based fund. The latter is expected to disburse a fresh $60 million installment of its loan later this year.
This and other external loans should finance almost half of the Armenian government’s budget deficit for next year projected at 183 billion drams ($475 million). The government has pledged to cover the rest of the gap from still unspecified “internal sources.”
“There is no reason why they should not be able to raise the money,” Sahay said, signaling the IMF’s endorsement of the draft budget for 2010 which envisages a nearly 10 percent drop in government spending. She suggested that the government will not only resort to substantial domestic borrowing but also use part of a $500 million Russian loan which it obtained in June.
Finance Minister Tigran Davtian told journalists on Friday that only about one third of that loan has been spent so far. Davtian said roughly $95 million has been lent to small and medium-sized enterprises through a special state fund and the Central Bank of Armenia. Another $52 million has been channeled into housing construction, he said, according to the ARKA news agency.
Both Davtian and Yeritsian stood by government projections, essentially endorsed by the IMF and the World Bank, that the Armenian economy will grow by 1.3 percent in 2010 after contracting by 18.4 percent in the first eight months of this year. The government expects the full-year GDP decline to ease to less than 16 percent.
“We already feel that the crisis has reached rock-bottom in Armenia and we expect some growth in the fourth quarter,” said Yeritsian. The rebound will be driven by the world’s unfolding emergence from its worst economic downturn in decades, he said.
“Naturally, the global economy and the Russian economy in particular have a strong impact on Armenia in terms of growth,” added the minister. “It’s obvious that the global trends are also present in Armenia. It’s just that the world will take a lot of time to recover because developed countries have experienced average decline rates of 10 percent.”
That, he said, means foreign investment in developing countries will be more scarce in the years to come. Armenia needs to carry out “very quick and comprehensive reforms” of its business environment in order to be well placed to attract it, he said.
Like the Western lending institutions, the two ministers believe that a possible reopening of the Turkish-Armenian border would significantly benefit Armenia’s economy. Davtian argued that it would not only open a new and large market to Armenia companies but also considerably facilitate their transport communication with Europe and the Middle East. “Armenia would be connected to the European and Asian railway and highway networks,” he said.
Yeritsian likewise spoke of “very big development opportunities” for Armenia but cautioned against excessive expectations from border opening. “I don’t think that things would change overnight or that there would be miracles,” he said. “So we shouldn’t get carried away.”