The European Union announced on Friday plans to provide Armenia with 100 million euros ($149 million) in assistance designed to alleviate its worst economic downturn since the early 1990s.
The EU’s executive European Commission will ask the bloc’s member governments soon to approve a loan of 65 million euros and a grant of 35 million euros, its office in Yerevan said in a statement.
“The assistance would be provided in two installments, tentatively in the first and fourth quarter of 2010,” read the statement. “The assistance supports, and is conditional on the respect of the adjustment program agreed between Armenia and the International Monetary Fund. It complements the latter's financial assistance to the country.”
The IMF approved a $540 million stand-by loan to the Armenian authorities in March after agreeing a set of measures meant to reduce the fallout from the global economic crisis. The fund raised its total amount to roughly $830 million in June, citing the recession’s stronger-than-anticipated impact on the Armenian economy.
The authorities have already drawn about half of the sum to replenish the country’s hard-currency reserves and finance a rising state budget deficit. A high-level IMF mission that visited Yerevan last month indicated that they will soon get another installment of the loan worth about $60 million. The mission praised the Armenian government’s and Central Bank’s response to the crisis.
The government projects a budget deficit of 183 billion drams ($475 million) for next year and plans to cover at least half of the spending gap with external funding. The EU assistance may well be used for that purpose.
“The proposed financing will complement the financial resources provided by the EU, in the form of budget support programs financed under the European Neighborhood and Partnership Instrument,” said the EU statement.
The EU also announced last month that it will provide 33 million euros in 2011-2013 to support “institutional reforms” that would allow Armenia to negotiate association and free trade agreements with the bloc. Armenia is eligible for such deals by virtue of its inclusion in the Eastern Partnership program that offers six former Soviet republics deeper integration with the EU in return for political and economic reforms.