By Atom Markarian
The International Monetary Fund has disbursed a new $14 million loan to Armenia, praising its government for improving fiscal discipline and the overall macroeconomic situation.
Armenian officials welcomed the decision on Thursday as a vindication of their economic policies. “This means that we have a credible program and that our economic indicators meet international standards,” Finance and Economy Minister Vartan Khachatrian told reporters.
The money, which will shore up hard currency reserves of the Armenian Central Bank, is the fourth installment of the IMF’s $95 million Poverty Reduction and Growth Facility (PRGF), a three-year loan program launched in May 2001.
"The Armenian authorities should be commended for the strong performance under the PRGF-supported program, in particular the reduction in the fiscal deficit, the repayment of domestic expenditure arrears, and continued low inflation,” Eduardo Aninat, the fund’s deputy manager director, said in a statement. “Continued implementation of sound macroeconomic policies and further structural reforms will be necessary to sustain high growth and facilitate further progress in poverty reduction,” he added.
The release of the tranche was made possible by successful talks in Yerevan last February between a visiting IMF mission and senior Armenian officials. In an ensued statement, the fund’s Yerevan office said the Armenian government’s fiscal and monetary policies are largely in line with IMF recommendations formalized by the PRGF credit. It also noted Armenia’s “strong economic performance.”
Official figures show that Armenia’s struggling economy grew at a record high rate of almost 13 percent in 2003 amid low inflation and improved tax collection.
“Continued good performance under the program will be essential to address the key economic challenges facing Armenia and mobilize support for a successful poverty reduction strategy," Aninat said.
The IMF again singled out Armenia’s loss-making energy sector as a major area of its concern. “Building on the improvements in the performance of the energy sector during 2002, additional measures are required to deal with the sector's debts and governance problems,” Aninat said.
The authorities have promised that last year’s privatization of Armenia’s electricity distribution network will drastically cut the sector’s losses that estimated at more than $50 million last year.
The IMF money is essential for the continued stable exchange rate of the Armenian currency, the dram. It also facilitates the disbursement of budgetary loans to Yerevan by the World Bank.
The authorities had on Thursday another cause for celebration after securing 24 million euros ($22.4 million) in fresh long-term loans and 2.5 million euros in grants from the German government. The news was announced after a session in Yerevan of a German-Armenian intergovernmental commission on economic cooperation. Khachatrian said 5 million euros of the sum will be set aside for low-interest loans to small Armenian businesses, while another 7 million will go to pay for the improvement of public services in some of the country’s regions.
Germany has provided Armenia with a total of 120 million euros worth of credit over the past ten years.