IMF APPROVES FINAL US$5.4MLN DISBURSEMENT TO ARMENIA UNDER PRGF ARRANGEMENT

ARKA
May 20, 2008

YEREVAN, May 20. /ARKA/. The Executive Board of the International
Monetary Fund (IMF) today completed the sixth and final review of
Armenia’s economic performance under the Poverty Reduction and Growth
Facility (PRGF) arrangement. The completion of the review enables
the release of an amount equivalent to SDR 3.32 million (about US$5.4
million), bringing total disbursements to the full amount of SDR 23
million (about US$37.3 million) under the arrangement.

Following the Executive Board’s discussion, Mr. Murilo Portugal,
Deputy Managing Director and Acting Chair, said that Armenia’s
adherence to prudent macroeconomic policies and the progress made
in structural reforms have contributed significantly to its strong
performance under its third PRGF arrangement. A marked reduction
in poverty has been achieved in a high-growth and low inflation
macroeconomic environment. "Strong remittance and foreign direct
investment inflows have dampened the impact of rapidly rising imports
on the balance of payments. The medium-term outlook remains positive
in view of favorable investment prospects," he said.

The IMF official pointed out that continued sound fiscal and monetary
policies remain key to maintaining macroeconomic stability and external
competitiveness, against the background of large-scale foreign exchange
inflows and upside inflationary risks. A tighter-than-budgeted fiscal
stance is warranted for 2008 as this would deliver welcome support
to monetary policy in keeping inflation expectations well anchored.

The existing monetary policy framework, based on a flexible exchange
rate, remains the best option for Armenia., Portugal said. "The
authorities’ timely monetary policy actions over the past year have
demonstrated the authorities’ commitment to price stability and helped
contain inflationary expectations despite strong headwinds from higher
world food and energy prices," he said.

Portugal stressed that strengthening the capacity for fiscal policy
analysis will be important for improving the effectiveness of fiscal
policy and helping maintain fiscal discipline. Increasing revenue
collections in a transparent and nondiscretionary manner will also be
crucial, in view of the need to improve the country’s infrastructure,
reduce poverty, and improve the business environment.

The authorities intend to press ahead with their structural reform
agenda to remove remaining bottlenecks to broad-based growth and to
safeguard competitiveness.

"Future reform efforts will appropriately focus on deepening
productivity-enhancing structural reforms, notably by reducing the
cost of doing business, boosting domestic competition, diversifying
the economy, and discouraging participation in the shadow economy,"
Portugal said.

He pointed out that the IMF welcomes Armenia’s interest in continuing
its close cooperation with the Fund after the current PRGF arrangement
expires in May 2008. Over the last 18 years, the IMF has allocated
$360mln to Armenia, with 80% of the loans carrying an annual interest
rate of 0.5 percent and being repayable over 10 years with a 5½
-year grace period on principal payments.

–Boundary_(ID_ED5Xs59UxmIE2/ZwNMmBuw)- –

From: Emil Lazarian | Ararat NewsPress