Press Release – International Monetary Fund
May 26 2005

US$34.2 Million Poverty Reduction and Growth Facility Arrangement for the
Republic of Armenia.

The Executive Board of the International Monetary Fund (IMF) today approved
a three year, SDR 23 million (about US$34.2 million) arrangement under the
Poverty Reduction and Growth Facility (PRGF) for the Republic of Armenia to
support the government’s economic program through 2008. The decision will
enable the Republic of Armenia to draw an amount equivalent to SDR 3.28
million (about US$4.9 million) from the IMF immediately.

Following the Executive Board’s discussion, Mr. Agustín Carstens, Deputy
Managing Director and Acting Chair, said:

“Armenia’s economic performance continued to be strong in 2004 and early
2005. Real GDP grew strongly, mainly driven by a boom in agriculture and
construction, while inflation fell, aided by an appropriately tight monetary
policy and the continued appreciation of the dram. Encouragingly, poverty
and inequality indicators have improved notably in recent years, owing
mainly to higher salaries, private transfers from abroad, and state social
assistance.

“The authorities’ new three-year PRGF-supported program aims at
consolidating macroeconomic stability, generating additional domestic
resources to finance poverty-reducing and growth-enhancing expenditures, and
boosting private sector activities. Tax and customs administration reforms,
the heart of the program, will focus on raising domestic resources in a
transparent and nondiscretionary manner, thereby helping to create a
business climate conducive to economic activity and strengthening the tax
base, which will be needed as external aid flows diminish over the medium
term.

“The Central Bank of Armenia (CBA) will continue to focus on maintaining
price stability, amid strong capital and remittance inflows. The CBA will
maintain the flexible exchange rate regime, while enhancing the instruments
for sterilizing capital inflows. Fiscal consolidation over the medium term
will facilitate containing the monetary effect of capital inflows.

“The program envisages financial sector reforms. The authorities will
strengthen banking supervision and improve corporate governance,
particularly of banks, to expand financial intermediation. They will step up
the pace of reforms in the nonbank financial sector, including by
implementing an appropriate supervisory and regulatory framework in the
insurance sector. The authorities are determined to address remaining
problems in the energy and water sectors, with the support of the World
Bank,” Mr. Carstens stated.