The loan tranche brought to about $332 million the total amount of funds allocated to the country under the IMF’s Stand-By Arrangement worth $443 million.
The IMF approved the lending program in May as the Armenian economy plunged into recession after three years of robust growth. The decision came shortly after the Armenian government announced plans to borrow around $540 million to offset a major shortfall in tax revenues and finance its efforts to contain the pandemic.
Armenia’s economic woes were compounded by the war in Nagorno-Karabakh that broke out in late September and was stopped by a Russian-brokered ceasefire six weeks later.
In a weekend statement announcing the disbursement, the IMF said that the Armenian economy is on course to contract by more than 7 percent this year seeing as “the full impact of the twin crises is still unfolding.”
“The Fund’s financial support will help Armenia meet these challenges, including the urgent social and economic implications of COVID-19 pandemic,” read the statement.
“The authorities have responded proactively to mitigate the socioeconomic and health effects of these shocks,” it quoted Tao Zhang, the IMF’s deputy managing director, as saying.
“The authorities’ 2021 budget is appropriate given weak growth and is embedded in a clear medium-term fiscal strategy. The authorities remain committed to taking measures to safeguard debt sustainability as a result of which public debt is expected to fall to around 60 percent of GDP over the medium-term,” added Zhang.
In its draft budget debated by the Armenian parliament, the government projected a GDP growth rate of 3.2 percent for next year.
The IMF expects the Armenian economy to expand by only 1 percent in 2021. Its statement said in this regard that the country’s economic outlook is “contingent upon the anticipated global recovery and domestic reform implementation.”
The Armenian currency, the dram, has weakened against the U.S. dollar by almost 6 percent in the last two months.