By Atom Markarian
The managing director of the International Monetary Fund, Rodrigo de Rato, has lavished praise on Armenia for the continuing “impressive” growth of its economy which looks set to remain in double digits for a sixth consecutive year. De Rato reiterated at the weekend the IMF’s highly positive assessment of the country’s macroeconomic indicators after what he described as “very productive” talks in Yerevan with President Robert Kocharian and other senior Armenian officials.
“Armenia’s economic performance has been impressive in recent years: double-digit growth since 2001 in an environment of low inflation; a strengthening external position; a reduction in poverty; and, more recently, a notable improvement in t ax performance,” he told a news conference.
“The authorities have done a commendable job in maintaining sound macroeconomic policies,” de Rato said. They will therefore be rewarded with $34 million in additional IMF loans to be disbursed in the next two years, he added.
De Rato arrived in Yerevan also to participate in a high-level conference of the so-called Dutch group of 12 countries, including Armenia, affiliated with the IMF and the World Bank. Armenian growth featured large during the two-day gathering that was attended by finance ministers, central bank chiefs and other top officials from those nations.
Official statistics put the Armenian economy, still reeling from the post-Soviet slump of the early 1990s, on track to expand by more than 10 percent this year.
“Even China is not achieving that sort of growth,” said Jeroen Kremers, a member of the IMF’s governing board representing the Dutch group. “That’s pretty good, I think.”
Just how big the impact of that growth on living standards has been is still a matter of contention. According to the National Statistics Service, the proportion of Armenians living below the official poverty line fell from 56 percent to 34.6 percent between 1999 and 2005. The Armenian government says this shows that the growth has benefited not only the small class of wealthy citizens but the population at large.
Critics counter, however, that the distribution of its benefits has been extremely uneven, citing a lack of new quality jobs created in recent years and the persisting huge scale of tax evasion in Armenia. Although the government’s tax revenues have steadily risen over the past decade, they still made up only 14 percent of Gross Domestic Product last year -- a very low proportion even by ex-Soviet standards. The poor tax collection in turn precludes a substantial increase in the still modest government spending on social security, education, healthcare and other public services.
De Rato singled out this problem as he spoke about key economic challenges facing Armenia. He said he urged Armenian leaders to improve tax and customs administrations in a “transparent and non-discretionary manner” -- an apparent allusion to the often arbitrary character of tax collection in the country. Kocharian was quoted by his office as telling de Rato that his government is doing its best to tackle the problem.
The IMF chief further defended the Kocharian administration’s monetary policies, defending the controversial appreciation of the Armenian currency, the dram. He stood by the IMF’s view that the stronger dram has substantially eased inflationary pressures on the Armenian economy even if it has hit hard local manufacturers and a considerable part of the population.
Government statistics show consumer price inflation averaging 3 percent in recent years. However, many Armenians feel that the rise in the cost of life in their country has been far more steep.
(Photolur photo: Rodrigo de Rato.)