The Armenian authorities should do “much more” to reform the country’s flawed business environment and thus foster continued economic growth, a senior official from the International Monetary Fund said on Wednesday.
“There have been some improvements in the business environment but still we think that much more needs to be done. Especially in the current conditions,” Guillermo Tolosa, the IMF’s resident representative in Yerevan, told RFE/RL’s Armenian service (Azatutyun.am).
“Armenia faces an increasingly pessimistic and adverse global environment. Armenia always faces a very difficult geopolitical situation. So the country cannot afford anymore to have the difficult business environment that it now has,” he warned.
The IMF’s deputy managing director, Nemat Shafik, likewise called for a “decisive breakthrough” in the Armenian government’s stated efforts to strengthen the rule of law and promote business competition as he announced the release of $56 million in fresh loan installments to Yerevan on Tuesday.
The government has repeatedly pledged to improve tax administration and the overall investment climate.
In an annual report issued in October, the World Bank said doing business in Armenia has become easier over the past year thanks to regulatory reforms carried out by the government. It cited less cumbersome procedures for starting a business, paying taxes and receiving construction permits.
Still, Armenia was ranked 153rd out of 183 countries surveyed in terms of the quality of tax administration. The World Bank argued that Armenian firms still spend an average of 500 hours a year on dealings with tax and customs officials. Armenia also scored rather poorly on investor protection and contract enforcement.
Both the bank and the IMF say that a more business-friendly environment is essential for the country’s continued recovery from the 2009 recession that led to a sizable increase in poverty.
Tolosa reaffirmed IMF warnings that Armenia could be adversely affected by Europe’s sovereign debt crisis if it slows economic growth in Russia and causes international commodity prices to fall. But he said the fund still thinks that the Armenian economy is “most likely” to grow by about 4 percent next year.
“But the risks associated with this target are increasing by the day,” added the IMF official.