ARMENIAN CABINET TO CONTINUE EXPANSIONARY POLICY IN 2010

/ARKA/
July 27, 2009
YEREVAN

Armenian Government will continue its expansionary policy in 2010,
the country’s Prime Minister Tigran Sargsyan said at a government
meeting Thursday. It will allow the country remaining acyclic and
promoting economic growth, he said.

The government followed a restrictive monetary-credit and budget policy
over the last five years to prevent overheating of the economy under
the two-digit economic growth conditions, Sargsyan said.

Under the economic decline (16.3% in the first half) an expansionary
policy is required, which means that government expenditures should
be increased.

"Even if the government do not have own means for this, it should
attract additional resources from internal and external markets,
and we are doing it together. This year we are implementing an
unprecedented expansionary fiscal policy," Sargsyan said.

Similar policy has been implemented by the Central Bank of
Armenia (CBA) after the return to a free float for the exchange
rate. Consequently, the CBA had to raise the refinancing rate by 1%.

"We have recorded that we entered a stage of lower inflationary
pressure; the CBA started reducing refinancing rate and turned to an
expansionary policy," Sargsyan said.

In early March 2009 the Central Bank of Armenia returned to a free
float policy. According to CBA experts, average weighted exchange
rat e is expected to range between 360 drams and 380 drams for $1 in
2009. The CBA has reduced the refinancing rate five times since March;
currently it is 5.5% p.a.

The Prime Minister said that the level of expenditures should be
maintained to prevent economic decline. All WB and IMF experts agree
with this, he said.

The government has already re-distributed on-budget expenditures
and received the approval of Armenian Parliament for bringing the
deficit down to 7.5% of the Gross Domestic Product. This means that
the parliament allowed the cabinet increasing the national debt and
receiving an additional of $300 million from the IMF for 2009-2010,
$60million from the WB and $80 million from the Asian Development Bank.

"These prestigious international organizations considered our policy
to be justified," Sargsyan said.