MURILO PORTUGAL ASSESSES ARMENIA’S ECONOMIC PERFORMANCE AS VERY STRONG
armradio.am
19.11.2008 14:27
The Executive Board of the International Monetary Fund (IMF)
has approved a three year, SDR 9.2 million (about US$13.6 million)
arrangement under the Poverty Reduction and Growth Facility (PRGF) for
the Republic of Armenia to support the government’s economic program
through 2011. The decision will enable the Republic of Armenia to
draw an amount equivalent to SDR 1.31 million (about US$1.9 million)
from the IMF immediately.
Following the Executive Board’s discussion, Mr. Murilo Portugal,
Deputy Managing Director and Acting Chair, stated:
"After the successful conclusion of its third PRGF-supported
program in May 2008, Armenia’s economic performance has remained
very strong. High growth has been maintained and has contributed
significantly to the marked reduction in poverty. Inflation has
increased in the wake of rising international food and fuel prices
and growing domestic demand pressures, although it remains lower than
in other CIS countries. Adherence to prudent macroeconomic policies
and the progress made in structural reforms has helped to achieve
these results.
"The worsened global macroeconomic outlook has increased uncertainty,
but Armenia is in a strong position to withstand the impact of the
global economic downturn. A gradual deceleration of growth in Armenia
may help dampen inflationary pressures. It may also contribute to
reducing the external current account deficit, which has increased
on the back of rising imports and sluggish exports, despite strong
remittance inflows. Medium-term prospects, although highly uncertain,
remain benign in view of favorable investment opportunities.
"Continued sound fiscal and monetary policies remain key to maintaining
macroeconomic stability. Prudent policies are necessary to reduce
the current macroeconomic imbalances. Current challenges highlight
the need to strengthen policy frameworks. The floating exchange
rate regime continues to be the best option for Armenia, and the
authorities are encouraged to complete the transition to full-fledged
inflation targeting. At the same time, building capacity for fiscal
policy analysis will help strengthen the budgetary process and enhance
fiscal policy credibility, increasing its effectiveness as a demand
management tool. In addition, the authorities must be prepared to
adjust swiftly to a rapidly changing economic environment. A weakening
external environment might also increase Armenia’s financing needs
and possibly call for an early review of the situation.
"Improving external competitiveness requires a renewed push for
structural reforms. Focus should be on enhancing productivity,
improving the business environment, and boosting domestic
competition. In this regard, the completion of the unfinished
tax policy and administration reform agenda is particularly
important. These reforms would significantly reduce the cost of doing
business, particularly in the export sector, and contribute to leveling
the playing field, ultimately promoting private sector development,"
Mr. Portugal said.