IMF MISSION REACHES STAFF-LEVEL AGREEMENT ON SECOND REVIEW OF STAND-BY ARRANGEMENT WITH ARMENIA
armradio.am
17.09.2009 15:33
An International Monetary Fund (IMF) mission, led by Mr. Mark Lewis,
visited Yerevan during September 3-16 to carry out discussions on the
second review of Armenia’s 28-month Stand-By Arrangement. At the end
of the mission, Mr. Lewis issued the following statement:
"The mission reached a staff-level agreement with the authorities
on a package of policies that aims at completing the second review
under the SBA.
On this basis, the IMF Executive Board is now expected to meet in late
October to discuss the completion of the second review. Board approval
would enable Armenia to draw SDR 37.72 million (about US $60 million).
"This has been a very challenging year for Armenia, with real GDP
now expected to decline about 15 percent in 2009. In a very difficult
global environment, these developments have led to some weakening in
the balance of payments and the public finances, and posed additional
hardships on the Armenian population.
"The authorities have implemented a broad range of policies to
address these challenges, described in their Letters of Intent of
March and June 2009, and macroeconomic policies are on track. Fiscal
policy continues to be appropriately expansionary in light of the
ongoing deep contraction of the Armenian economy. Thanks to financial
support from the IMF and donors, the government has been able to
keep expenditures close to the original 2009 budget, while increasing
spending on high-priority infrastructure projects.
"However, given the large drop in tax revenues, the public deficit
could rise up to around 7.5 percent of GDP. Once the economy recovers,
the government should undertake a gradual consolidation to preserve
medium-term fiscal and debt sustainability, while continuing to
support needed public spending and investment. Continued progress in
tax administration reforms will be critical to ensuring sound public
finances, and a fair and equitable tax burden.
"The monetary policy stance has eased further, and the Central Bank
(CBA) has expanded its instruments to provide liquidity to the
banking system in order to unblock credit to the private sector. At
the same time, inflation is on track to meet the CBA’s target. The CBA
should stand ready to adjust its monetary policy stance in response
to a worsening of the crisis or stronger-than-expected inflationary
pressures.
"These policies should help economic conditions improve. In the period
ahead, the continued successful implementation of the program will pave
the way for an early return to sustainable economic growth, a strong
balance of payments, and continued progress in poverty reduction.
"The mission would like to express gratitude to the authorities for
their hospitality and fruitful cooperation.