Armenia’s current government is committed to implementing key reforms needed for speeding up economic growth and reducing poverty in the country, a senior official from the International Monetary Fund said on Wednesday.
The official, Hossein Samiei, led an IMF team that met with Prime Minister Karen Karapetian and other senior Armenian officials during a two-week mission to Yerevan.
The talks paved the way for the disbursement of the final $20 million tranche of an IMF credit worth roughly $115 million. The Extended Fund Facility (EFF) approved three years ago is designed to support macroeconomic stability in Armenia.
“One positive thing that we observed is that we think the new government is reform-minded and committed to improving the structural environment,” Samiei told reporters at the end of the mission.
He pointed to ongoing efforts by Karapetian’s cabinet to improve the domestic business environment, tackle tax evasion and attract foreign investment, including through the establishment of Russian-Armenian investment funds.
Samiei was particularly encouraged by a more than 10 percent rise in the Armenian government’s tax revenue in the first quarter of this year. “Hopefully, over time the taxation system will become fairer so that people pay their fair share of taxes and the focus is not only on a small group of people who comply with taxation,” he said.
“Of course, a lot of challenges remain,” added the IMF official. “I’m not saying everything is perfect. But hopefully things are moving in the right direction.”
Karapetian has repeatedly pledged to create “equal conditions” for all business since he was named prime minister in September. He spoke in February of “fundamental” changes within Armenia’s tax and customs services currently run by one of his longtime associates.
Opposition politicians dismiss the premier’s ambitious reform agenda. They say, in particular, that wealthy businesspeople close to the government continue to enjoy a monopoly on lucrative imports of essential goods and commodities.
Economic growth in Armenia all but ground to a halt last year amid a continuing recession in Russia, the country’s leading trading partner and the main source of multimillion-dollar remittances from Armenian migrant workers. According to the latest IMF projections cited by Samiei, the Armenian economy should expand by around 3 percent this year not least because of improving conditions in Russia as well as additional capital spending planned by the authorities in Yerevan.
Karapetian’s cabinet announced last week that it will likely spend roughly $100 million more than expected this year as a result of extra budgetary revenue made possible by the improved tax administration .
“Growth, as we saw during the course of 2016, is volatile,” cautioned Samiei. “The exports sector needs to become more diversified. Unemployment and poverty need to be reduced.”
The “decisive actions” promised by the government are essential for achieving faster and sustainable growth, the IMF representative went on. “Currently, we estimate potential growth -- the maximum that Armenia at the moment can achieve -- at around 4 percent,” he said. “However, in my view, Armenia has the potential to grow much faster -- 6 percent, 7 percent -- if the structural reforms … take place.”