The World Bank has disbursed a fresh $50 million loan to Armenia which will help the Armenian government finance the state budget deficit projected to grow next year.
The bank’s executive board in Washington approved the allocation late on Wednesday hours after the government pushed its 2016 budget proposal through parliament.
The budget envisages a more than 5 percent rise in public spending and a slight drop in state revenue reflecting sluggish economic growth anticipated next year. This is expected to translate into a deficit equivalent to 3.5 percent of Armenia’s Gross Domestic Product, the highest level in years.
In a statement, the World Bank said the low-interest loan repayable in 25 years will support the implementation of “a wide range of reforms” promised by the authorities in Yerevan. Those include further measures to improve the country’s business environment and, in particular, the passage of a new Armenian Tax Code.
“The new Tax Code will address issues related to complex, unsystematic and occasionally contradictory regulations reducing voluntary tax compliance, distorting the horizontal equity of taxation and creating uncertainty for businesses and households,” said the statement. This will expand the tax base and close “major loopholes in the current tax legislation,” it said.
The disbursement raised to $2.2 billion the total amount of World Bank funding received by Armenia since 1993. The figure is equivalent to almost half of the country’s current foreign debt.