The International Monetary Fund will likely disburse next month $280 million in emergency loans designed to help Armenia fight the coronavirus outbreak and mitigate its economic consequences, a senior IMF official said over the weekend.
Yulia Ustyugova, the fund’s resident representative in Yerevan, told RFE/RL’s Armenian service that the IMF is also planning $140 million in additional funding to Armenia.
The Armenian government announced last week plans to borrow around $540 million for cushioning the impact of an unfolding economic recession in the country. Finance Minister Atom Janjughazian said the government needs to offset a major shortfall in its tax revenues and to continue financing coronavirus relief measures.
Ustyugova said that IMF officials have recommended the $280 million disbursement to the fund’s executive board, which should approve it in the second half of May. She said the sum includes a $248 million “stand-by arrangement” which was allocated to Armenia in May 2019 and has not been used by the latter until now.
“Also, the [Armenian] authorities have requested additional financial help from the IMF to help pay for the economic support program and necessary healthcare expenditures in the current environment,” said Ustyugova.
“So $280 million will be available in the second half of May. The program itself will last until May 2022, and about $140 million will additionally be available after May 2020,” added the IMF official.
She insisted that the emergency borrowing is justified even though it will lead to a sizable increase in Armenia’s foreign debt. “The measures that need to be taken right now will help to avoid more painful and prolonged socioeconomic damage in the future,” she said.
The Armenian government has promised a wide range of coronavirus-related compensatory measures, including cash payments to a large part of the population, financial assistance to businesses and loan subsidies for farmers. According to Janjughazian, it plans to spend $150 billion drams ($315 million) for this purpose this year.
Ustyugova praised the government’s “swift” response to the economic fallout from the global health crisis. “We welcome the package of economic policy measures that was announced by the authorities,” she said.
In its World Economic Outlook released earlier this month, the IMF forecast that the Armenian economy will shrink by 1.5 percent this year due to the coronavirus pandemic. The Armenian Ministry of Finance expects a 2 percent drop in GDP.
Ustyugova stood by the IMF projections. “We currently see the pandemic having a very sharp but also very short-lived impact on Armenia,” she said. “So we expect the peak of the shock to happen around the second quarter, with some slight recovery starting already in the third quarter [of this year,] and an acceleration of economic activity in the fourth quarter to 2021.”
The IMF cautioned at the same time that a prolonged COVID-19 pandemic would lead to a sharper GDP contraction. “There are lots of risks to these projections and the risks, I would say, are tilted to the downside,” she said.