IMF welcomes Armenian authorities’ policy

YEREVAN, March 9. /ARKA/. Murillo Portugal, Deputy Managing Director
and Acting Chair, speaking Monday at a press conference where he
commented International Monetary Fund’s approval of $540 million credit
for Armenia, welcomed the policy the country’s authorities pursue.

`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’, he said.

Portugal said that since the approval of a low-access PRGF arrangement
in November 2008, Armenia has been confronted by a variety of major
external shocks.

`Reflecting the sharp deterioration in global economic conditions,
private transfers and capital inflows slowed considerably and
international commodity prices have dropped severely, affecting mining
exports and production’.

Portugal said that in light of a rapid decline in international
reserves and growing financing needs, the authorities have requested
additional financial assistance from the Fund.

`Falling international prices, lower growth, and exchange rate
depreciation will help reduce the external current account deficit.
Medium-term prospects remain good.

Along with that, Portugal said that Armenia is still vulnerable before
possible regional economic decline and political tension.

He said that reasonable policy will help maintain macroeconomic
stability and mitigate impacts of the global crisis.

`While a 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’, Murillo Portugal said.

IMF has approved 28-month Stand-By Arrangement for Armenia amounted to
SDR 368 million ($540 million).

The IMF lends this money to support programs aimed at adapting the
country to deteriorating global prospect and restoration of public
confidence in monetary and financial system and protection of the poor.

SDR 161.5 million (about $237 million) of this money will be
transferred immediately and the remaining amount will be sent in nine
tranches, after considering quarterly reviews.

The arrangement gives opens access to IMF funds that makes 400% of
Armenia’s share.

The loan is extended under 1.54% annual interests for a five-year
term.-0—