ARMENIA WILL LIKELY RECEIVE $540-MILLION IMF LOAN
By Polya Lesova, MarketWatch
MarketWatch
m/news/story/armenia-poised-get-540-million/story. aspx?guid=%7B9A0A5C2B-8E0A-474A-9BFE-5FC035226C1E% 7D&dist=msr_1
March 1 2009
Funding would come as nation floats its currency to cushion crisis
impact
NEW YORK (MarketWatch) — The International Monetary Fund announced
Tuesday that it will likely loan $540 million to Armenia, just as the
ex-communist country said it will adopt a floating exchange rate to
cushion the blow of the global economic crisis.
Dominique Strauss-Kahn, managing director of the IMF, said Tuesday
that he will recommend that the fund’s executive board approve a
request for a $540 million, 28-month stand-by arrangement with Armenia.
The board is expected to meet later this week to discuss the
arrangement. After board approval, Armenia will be able to draw about
$239 million immediately.
The IMF has already provided loans to a number of emerging market
nations, most of them in Eastern Europe, including Hungary, Latvia,
Ukraine, and Serbia.
There is also growing market speculation that Romania may need IMF
aid. A Romanian delegation is currently visiting Washington, D.C.,
for talks with officials from the fund.
"The meetings are part of ongoing discussions on recent economic
developments and the challenges facing the Romanian economy," said
Angela Gaviria, external relations officer at the IMF, in an emailed
statement on Tuesday.
Armenia floats its currency With a population of 3 million, Armenia
is a landlocked country located in the South Caucasus that was once
part of the Soviet Union.
"After many years of strong economic performance, Armenia has been
adversely affected by the global economic and financial crisis,"
Strauss-Kahn said in a statement.
"In response, the Armenian authorities have put together a strong and
credible economic program to address the deterioration in Armenia’s
external outlook, restore confidence in the currency and financial
system, and protect the poor."
The policy package developed by Armenian officials in consultation
with the IMF includes the return to a floating exchange rate, which
will "cushion the economy from external shocks and safeguard foreign
exchange reserves," the IMF said.
Armenia’s central bank confirmed Tuesday that it will float its
currency, the dram.
"This will allow the exchange rate to find a new level that is more
in line with the existing macroeconomic fundamentals, which have been
negatively affected due to worsening terms of trade conditions and
slowing of capital inflows," the bank said in a statement published
on its Web site.
An average range of 360 to 380 dram per U.S. dollar "would be more
in line with equilibrium macroeconomic conditions," the bank said.
This implies devaluation of up to 24% for the dram, which stood at
306 per U.S. dollar before new policy was announced Tuesday, the
Associated Press reported.
Armenia’s central bank also raised its refinancing rate by 1% to 7.75%
on Tuesday.
In recent years, Armenia’s economy grew at about 13%, leading to a
dramatic reduction in poverty, according to the World Bank. However,
the global economic crisis has hurt Armenia, causing a sharp decline
in growth and a rise in unemployment.
The World Bank has announced that it will give Armenia $35 million
in expedited funding to create jobs and upgrade infrastructure,
as economic growth will likely fall below zero in 2009.
Remittances, which accounted for nearly 20% of Armenia’s gross
domestic product, are expected to fall sharply this year, according
to the World Bank.
From: Emil Lazarian | Ararat NewsPress