IMF approves US0 Million Stand-By Arrangement for Armenia

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WASINGTON, MARCH 10, NOYAN TAPAN. The Executive Board of the
International Monetary Fund (IMF) has approved a 28-month SDR 368
million (about US0 million) Stand-By Arrangement for Armenia to support
the country’s program to adjust to the deteriorated global outlook,
restore confidence in the currency and financial system, and protect
the poor. The approval makes the amount equivalent to SDR 161.5 million
(about US7 million) immediately available and the remainder in nine
installments subject to quarterly reviews.

According to a press release of the IMF, the Stand-By Arrangement
entails exceptional access to IMF resources, amounting to about 400
percent of Armenia’s quota. It was approved under the Fund’s fast-track
Emergency Financing Mechanism procedures.

It is said in the press release that "the authorities’ program is based
on a consistent set of measures regarding exchange rate, monetary,
financial, and fiscal policies, as well as continued structural
reforms".

"The authorities intend to cut back on non-priority spending while
providing an increase in social spending of 0.3 percent of GDP,
relative to the budget, to protect the poor through well-targeted
social safety nets. Additional external financing will be used to boost
public investment. Armenia’s gross external financing requirements are
projected at about US.6 billion for 2009, and will remain elevated
through 2011, albeit with a slight downward trend. The Stand-By
Arrangement will cover a large share of the country’s 2009-2011
financing gap. Additional financing will be provided by Armenia’s
donors and international partners, including the World Bank," the press
release reads.

Mr. Murillo Portugal, IMF’s Deputy Managing Director and Acting Chair,
said: "With the adverse global developments, real growth is expected to
contract in 2009, reflecting the downturn in Russia and other countries
in the region. Falling international prices, lower growth, and exchange
rate depreciation will help reduce the external current account
deficit".

"Sound policies are essential to maintain macroeconomic stability. The
recent return to a flexible exchange rate will help cushion the impact
of the global downturn and eventual further regional deterioration. An
appropriately tight monetary policy is necessary to contain the
inflationary pressures stemming from the depreciation and support
demand for dram-denominated assets. While potential negative impact of
the depreciation on the financial sector seems unlikely, contingency
plans are available to help address any such effects. In light of the
expected revenue shortfall, fiscal policy will remain prudent,
protecting social outlays and public investment by reducing
non-priority spending. Maintaining the structural reform agenda will
contribute to macroeconomic stability and a strengthened business
environment. Key elements include the completion of the unfinished tax
policy and tax administration reform agenda, and progress on financial
sector reforms," M. Portugal said.