The three-year Stand-By Arrangement (SBA) was unveiled on Tuesday seven months after the Armenian authorities received the final installment of a similar IMF loan worth $415 million.
“The Armenian authorities have indicated that they will treat the arrangement as precautionary,” read an IMF statement. “The new SBA will serve as insurance in case shocks generate balance of payments needs and will support the authorities’ reform efforts.”
The statement quoted Bo Li, the fund’s deputy managing director, as saying that the country may need such funding despite achieving robust economic growth this year. He cautioned that its economic outlook is “subject to significant uncertainty due to spillovers from Russia’s war in Ukraine, global financial tightening, and a slowdown in major trading partners.”
The Armenian economy is on course to grow by at least 11 percent this year on the back of soaring trade with and remittances from Russia. Local businesses appear to have taken advantage of Western economic sanctions against Moscow, with Armenian exports to Russia more than doubling in the first ten months of this year.
Li commended the authorities for maintaining fiscal discipline, keeping the increased public debt “on a declining path” and planning to further improve tax collection. He also praised the Central Bank of Armenia for significantly tightening its monetary policy in the face of high inflation.
“The financial system is in good health,” added the IMF official.
Incidentally, the Central Bank announced on Tuesday yet another increase in its benchmark interest rate, again citing the need to curb inflationary pressures. Its governing board set the refinancing rate at 10.75 percent, up by 0.25 percentage points.
A statement released by the bank said that although annual inflation in Armenia eased to 8.8 percent in November global “inflation expectations” remain high.