IMF MISSION VISITED YEREVAN

RIA Oreanda
Sept 17 2009
Russia

Yerevan. OREANDA-NEWS . September 17, 2009. 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 Armenias 28-month Stand-By Arrangement (see Press Release
No. 09/68). 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 USD
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 CBAs 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.