STATEMENT BY IMF MANAGING DIRECTOR RODRIGO DE RATO DURING HIS VISIT TO ARMENIA

International Monetary Fund (IMF)

June 20 2006

Mr. Rodrigo de Rato, Managing Director of the International Monetary
Fund (IMF), issued the following statement today in Yerevan during
his visit to Armenia, where he is participating in an IMF/World Bank
Constituency Meeting, as well as holding meetings with the Armenian
authorities:

"I am pleased to be in Armenia for the first time. The purpose of
my visit is to attend the annual meeting of a group of 12 countries,
including Armenia, that work together at the Executive Boards of the
IMF and the World Bank. I have met with the Armenian authorities and
reviewed with them the impressive performance of the economy over
the past five years.

"I have had the privilege to meet the President and Prime Minister,
as well as the government’s economic team. We had very productive
discussions, and I would like to thank the Armenian authorities
for their warm welcome and the excellent arrangements they made for
this event.

"Armenia’s economic performance has been impressive in recent
years: double-digit growth since 2001 in an environment of low
inflation; a strengthened external position; a reduction in poverty
and unemployment; and, more recently, a notable improvement in tax
performance. The IMF has supported the government’s reform programs
under successive concessional arrangements. In May 2005, the IMF’s
Executive Board approved a new three-year program under the Poverty
Reduction and Growth Facility in support of the government’s economic
program through 2008, and just last month completed the second
review under the program. Armenia will be eligible to draw about
US$34 million under this concessional facility through mid-2008.

"My discussions focused on how to sustain strong economic growth and
poverty reduction over the medium term, in particular the need for
continued prudent macroeconomic policies; strong revenue performance
to fund infrastructure development and expand public services targeted
at poverty alleviation; and financial sector development.

These reforms will require a broad social consensus and strong
program ownership.

"The authorities have done a commendable job in maintaining sound
macroeconomic policies. I am pleased that the authorities are committed
to continued prudent macroeconomic policies, including in the run-up
to next year’s parliamentary elections.

"A good deal of my discussions focused on moving ahead forcefully
with reforms in tax and customs administrations intended to raise
revenues in a transparent and non-discretionary manner. I very much
welcome the tax and customs reforms already implemented, which have
resulted in a notable increase in revenue collection in 2005 and
thus far in 2006. We agreed on the need to reduce tax exemptions as
well as strengthen tax and customs administrations. Such steps could
significantly improve the business climate, which is necessary to
spur investment, and reduce the size of the shadow economy.

"Armenia has taken important steps to modernize its financial system.

I support the monetary authorities’ efforts to consolidate these
gains, especially by continuing to strengthen financial sector
supervision, fostering a competitive environment in the sector, and
deepening and broadening financial markets. I was pleased to hear
about the central bank’s proposal to improve corporate governance
in the financial sector. These initiatives will reduce borrowing
rates, increase financial intermediation, and encourage savings and
investment. Financial sector development also hinges on integrating
the shadow economy into the official one.

"In conclusion, I am encouraged by the meetings held with the Armenian
authorities. I sensed strong ownership of reforms, as evidenced by
the consultative process in designing Armenia’s Poverty Reduction
Strategy, which bodes well for continued economic success.

The IMF stands ready to continue to assist Armenia with policy and
technical advice, as well as financial support in implementing its
reform agenda.

"We are also happy to support greater outreach to encourage a better
understanding of macroeconomic and financial issues and the IMF’s
role in this area. Indeed, I understand that there was a very well
attended event yesterday with parliamentarians and others in which
my colleagues participated. I wish the authorities success in their
endeavor and I look forward to your questions."

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