INTERNATIONAL MONETARY FUND: STATEMENT AT THE CONCLUSION OF AN IMF MISSION TO ARMENIA
M2 Presswire
October 1, 2007
M2 PRESSWIRE-OCTOBER 1, 2007-INTERNATIONAL MONETARY FUND: Statement
at the Conclusion of an IMF Mission to Armenia ©1994-2007 M2
COMMUNICATIONS LTD
A International Monetary Fund (IMF) mission led by Ms. Marta
Castello-Branco, visited Yerevan during the period September 5-19,
2007, to conduct discussions for the fifth review under the Poverty
Reduction and Growth Facility (PRGF) arrangement, and to seek
understandings on the 2008 budget. Mr. Lorenzo Perez, Deputy Director
of the IMF, also participated in the concluding policy discussions.
The mission met with government officials, Central Bank of Armenia
(CBA) staff, business representatives, and the international donor
community. A key task of the mission was to reach understandings on
an appropriate policy framework for the remainder of 2007 and 2008,
in light of the need to manage large-scale foreign exchange inflows and
to deal with emerging expenditure pressures associated with the planned
pension increases and a potential hike in import gas prices in 2009.
The mission issued the following statement at the conclusion of the
mission on September 18, 2007:
"Economic performance remains strong, with double-digit growth, low
inflation, and a further improvement in tax collection. The outlook
for 2008 and beyond remains positive, in view of favorable investment
prospects and availability of external grants. Import growth continues
to outpace export growth, but strong inflows of remittances should
dampen the impact of the appreciating dram on the current account
deficit. Since foreign exchange inflows are expected to persist, to
maintain external competitiveness the authorities need to keep prudent
monetary and fiscal policies, and remove structural impediments to
economic growth.
"The PRGF-supported program remains on track. Program measures will
continue to focus on maintaining macroeconomic stability and on
implementing structural reforms to strengthen tax administration and
improve financial intermediation.
"A prudent fiscal stance in recent years has contributed to low
inflation, high growth, and low public debt. Going forward, continued
sound fiscal policy will be essential for maintaining macroeconomic
stability and external competitiveness, as well as encouraging foreign
investment. At the same time, increasing the tax revenue/GDP ratio in
a transparent and nondiscretionary manner will be crucial to finance
infrastructure projects, expand essential poverty-reducing services,
and improve the business environment.
"Inflation remains well within the authorities’ target band (4
1.5 percent), but the central bank should stand ready to tighten
monetary policy if high food and energy import prices exert
inflationary pressure. The recent pick-up in credit growth is a
positive development and, together with the expected entry of new
foreign banks, should help increase financial intermediation. To
avoid possible risks related to a rapid expansion of bank credit,
the CBA should continue to hold banks to high prudential standards
and encourage further improvement in banks’ risk management and in
borrower transparency (through strengthened corporate governance and
accounting, and an effective credit bureau.
"While the business environment has improved markedly, several recent
surveys highlight important remaining challenges, particularly
regarding tax administration, access to credit, and domestic
competition. Addressing these shortcomings will be crucial to enhance
productivity and improve Armenia’s competitiveness. The entry of
new banks and the acceleration in credit growth are good news in
that regard. However, further action is needed to strengthen tax
administration and to encourage domestic competition. To that end,
the mission considers as top priorities:
o To make serious efforts to modernize tax administration, while
increasing efficiency, transparency, and fairness in tax collection.
Discretionary means, such as the accumulation of unprocessed VAT
refunds and requests for advance tax payments should not be used for
achieving revenue targets.
o To look for ways to reduce monopolistic practices in the import
business, with a view to increasing the pass-through of exchange rate
changes to domestic prices.
o To allow current tax exemptions to expire, while not introducing
new exemptions or tax amnesties. International experience has shown
that what is crucial to encourage enterprise development is removing
existing barriers and bottlenecks in order to create a level playing
field and further improve the business environment."
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From: Emil Lazarian | Ararat NewsPress
