{"id":5957,"date":"2011-07-03T07:45:03","date_gmt":"2011-07-03T07:45:03","guid":{"rendered":"http:\/\/www.aaeurop.com\/?p=5957"},"modified":"2011-07-03T07:45:03","modified_gmt":"2011-07-03T07:45:03","slug":"current-imf-supported-programrepublic-of-armeniaimf-executive-board-completes-second-review-under-effecf-arrangement-for-armenia-and-approves-us57-8-million-disbursement","status":"publish","type":"post","link":"https:\/\/www.aaeurop.com\/?p=5957","title":{"rendered":"Current IMF-Supported Program:Republic of Armenia:IMF Executive Board Completes Second Review Under EFF\/ECF Arrangement for Armenia and Approves US$57.8 Million Disbursement"},"content":{"rendered":"

Three-year, US$395 million program under the Extended Fund (EFF) and Extended Credit facilities (ECF), approved by the IMF Executive Board in June 2010. With strong performance, the Board concluded the second program review in June 2011, enabling disbursement of about US$58 million<\/h3>\n

\u0569\u0082\u0539\u00a0<\/p>\n

Press Release No. 11\/264
\nJune 29, 2011<\/small><\/p>\n

The Executive Board of the International Monetary Fund (IMF) has completed its second review of Armenia\u0569\u00a7\u0549\u0082-\u0549\u0084\u00a7s economic performance under a program supported by the Extended Fund Facility (EFF) and the Extended Credit Facility arrangement (ECF).1<\/a><\/sup><\/p>\n

The decision enables the authorities to draw an additional SDR\u0569\u0082\u0539\u00a036.2\u0569\u0082\u0539\u00a0million (about US$57.8\u0569\u0082\u0539\u00a0million), bringing total disbursements under the arrangement to an amount equivalent to SDR 108.6 million (about US$173.5\u0569\u0082\u0539\u00a0million).<\/p>\n

The three-year SDR\u0569\u0082\u0539\u00a0266.8 million (about US$426.2 million) EFF and ECF arrangement with Armenia was approved by the IMF\u0569\u00a7\u0549\u0082-\u0549\u0084\u00a7s Executive Board on June 28, 2010 (see Press Release No. 10\/263<\/span><\/a>).<\/p>\n

Following the Executive Board’s discussion on Armenia, Ms. Nemat Shafik, Deputy Managing Director, stated:<\/p>\n

\u0569\u00a7\u0549\u0082-\u056a\u0093The Armenian authorities are to be commended for the continued implementation of sound policies under the Fund-supported program. These policies have helped underpin a steady recovery from the global financial crisis. Growth is expected to accelerate and broaden in 2011, but Armenia faces a number of outstanding challenges, including a surge of inflation, sizeable external and fiscal imbalances, high financial dollarization, and, in the wake of the crisis, increased public debt and poverty.<\/p>\n

\u0569\u00a7\u0549\u0082-\u056a\u0093Fiscal policies have been prudent, with the budget deficit reduced significantly in 2010, and further consolidation underway in 2011 and planned for the medium term. The strengthened fiscal position will help ensure fiscal and debt sustainability and reduce vulnerabilities. Decisive implementation of tax policy and revenue administration reforms will ease the burden of adjustment on spending and provide space for additional, well-targeted capital and social outlays. These, in turn, will help reverse the crisis-related increase in poverty.<\/p>\n

\u0569\u00a7\u0549\u0082-\u056a\u0093Monetary policy will continue to aim at mitigating wider inflationary pressures. The authorities\u0569\u00a7\u0549\u0082-\u0549\u0084\u00a7 policy response to the pickup of inflation has been timely and effective, and efforts to more actively manage liquidity have increased the responsiveness of market rates to the policy rate, improving the traction of monetary policy. The Central Bank of Armenia stands ready to take additional actions should inflationary pressures persist. Private inflows have resumed and banking indicators, already strong, continue to improve. The Central Bank of Armenia continues its efforts to improve the resilience of the banking sector.<\/p>\n

\u0569\u00a7\u0549\u0082-\u056a\u0093Sound macroeconomic policies and structural reforms will help ensure a smooth and orderly external adjustment. Broad-based reforms aimed at enhancing the business environment and domestic competition will promote external competitiveness, productivity, and exports, and greater flexibility of the dram will provide appropriate price signals and reduce exposure to foreign exchange risk.\u0569\u00a7\u0549\u0082-\u0539\u009d<\/p>\n

\n

1<\/a><\/sup> The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund\u0569\u00a7\u0549\u0082-\u0549\u0084\u00a7s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF carries a zero interest rate, with a grace period of 5\u0569\u0082\u0539\u0566 years, and a final maturity of 10 years (http:\/\/www.imf.org\/external\/np\/exr\/facts\/ecf.htm<\/a>). The Fund reviews the level of interest rates for all concessional facilities every two years.<\/p>\n

<\/p>\n

Background<\/h3>\n

After a deep downturn in 2009, activity in Armenia is recovering, underpinned by a strong policy response and the gradual return of external flows, reflecting rebounding remittances, bank lending, and exports, helped by high mineral prices. However, the recovery has been slow and uneven, with gains in industry and services partly offset by a sharp decline in agriculture in 2010, reflecting both poor weather and underlying structural weaknesses. Recovery of the construction sector\u0569\u00a7\u0549\u0082-\u0549\u0080\u009da key driver of pre-crisis growth\u0569\u00a7\u0549\u0082-\u0549\u0080\u009dwas sluggish. Higher food prices have contributed to a run-up of headline inflation, which is at 9 percent as of end-May. With the economy recovering slowly and a weak external environment, important medium-term challenges have come to fore. The external current account deficit has remained at double-digit levels, the public debt ratio has almost tripled in the past two years, and poverty levels have risen as a result of the crisis.<\/p>\n

Role of the Fund<\/h3>\n

In the first half of 2010, the authorities reformulated their economic program to give more attention to Armenia\u0569\u00a7\u0549\u0082-\u0549\u0084\u00a7s medium-term challenges. They cancelled the stand-by arrangement that had supported the response to the crisis and put in place a three-year program supported by the EFF and ECF arrangements. The program aims to achieve strong growth and poverty reduction, debt sustainability, and financial sector stability with a focus on:<\/p>\n