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The International Monetary Fund praised Armenia’s macroeconomic performance but stressed the need for “bolder and deeper reforms” as it announced $57.6 million in fresh loans to Yerevan on Thursday.


“Armenia is on the right trajectory as it exits the crisis,” the IMF’s executive board said after a meeting held in Washington late on Wednesday. “Recent macroeconomic
developments are encouraging, despite some—largely supply driven—inflationary
pressures.”

“Structural reforms have also progressed, but need to proceed faster to raise the growth potential of the economy,” it added in a statement.

The disbursed funds are the latest installments of two lending programs for Armenia approved by the IMF in June. The launch of the three-year loan package worth $394 million ended the fund’s emergency anti-crisis lending to Yerevan that began in March 2009. The IMF argued that renewed economic growth in Armenia is necessitating a change in the authorities’ economic needs and priorities.

The IMF board again stressed that growth will be sustainable in the medium term if the authorities finally improve governance, tax administration and the country’s broader business environment. It said relevant measures taken by them so far have been insufficient.

“While the government’s commitment to reforming the tax administration is welcome, efforts to strengthen tax administration and advance tax policy reforms have had mixed success, in part reflecting political economy constraints,” read the IMF statement.

This appears to be a thinly veiled reference to government-linked wealthy entrepreneurs that are believed to continue to underreport their earnings. Some of them also enjoy a de facto monopoly on lucrative types of business. Armenia’s current and former leaders have heavily relied on these individuals in holding on to power.

“Bolder and deeper reforms are needed to improve governance, enhance competition, diminish monopolistic behavior, diversify exports, and more generally, modernize the economy,” said the IMF. It also urged the authorities to address conflicts of interest among state officials.

Armenian officials and Prime Minister Tigran Sarkisian in particular have repeatedly pledged to implement such reforms. In a November 2009 speech, Sarkisian acknowledged that oligarchic structures and practices pose “a very serious challenge” to the state.

The World Bank has found little improvement in the Armenian business environment, in annual global surveys conducted in recent years. Armenia ranked 48th in the bank’s latest “Doing Business” index released last month.
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