Underscoring its satisfaction with economic policies of the Armenian authorities, the International Monetary Fund has disbursed a fresh $60 million installment of a large-scale loan designed to help them cope with the ongoing economic crisis.
The move raised to about $479 million the total amount of funding received by Armenia under the IMF’s emergency “stand-by arrangement,” or SBA, approved in March. The fund increased the 28-month lending scheme by more than half to about $830 million in June, citing the sharper-than-anticipated impact of the global recession on the Armenian economy.
The Armenian government and Central Bank have been using the IMF funds to finance a widening state budget deficit, replenish the country’s hard-currency reserves and thereby prevent a further sharp depreciation of the national currency, the dram.
“The authorities have fully implemented their economic program, which calls for the continuation of fiscal and monetary easing and a flexible exchange rate,” Takatoshi Kato, the IMF’s deputy managing director, said in a statement late Monday that announced the release of the fresh SBA tranche.
The disbursement has been anticipated since a mid-September visit to Yerevan by an IMF mission that held talks with senior Armenian officials. Ending the weeklong trip, the mission head, Mark Lewis, praised the authorities for their “very good performance” in managing the crisis.
Lewis pointed out that the government has managed to attract more than $1.5 billion in foreign loans that have enabled it to mostly offset a serious shortfall in tax revenues resulting from the recession. He also commended the Central Bank of Armenia (CBA) for seeking to stimulate bank credit to Armenian firms while maintaining the relative stability of the country’s financial system.
Kato noted that continued CBA efforts to facilitate commercial bank lending will be “crucial” for getting the economy out of its worst downturn since the early 1990s. While standing by the IMF forecast that Armenia will register modest growth next year, he cautioned that the country’s “short-term outlook remains challenging.”
“Continued reforms, particularly in the areas of tax policy and tax reform administration, the financial sector, and the business environment will be necessary to boost the medium-term growth potential of the economy,” added the IMF executive.
A top World Bank official issued a similar warning in far more blunt terms during a recent trip to Yerevan. Ngozi Okonjo-Iweala, the bank’s managing director, said Armenia can not regain high rates of growth unless its leadership changes the “oligopolistic” structure of the national economy, bolsters the rule of law and shows “zero tolerance” of corruption.