PRELIMINARY CONCLUSION REACHED IN ARMENIAN IMF PROGRAMME REVIEW

World Market Research Centre
Global Insight
September 17, 2009

An International Monetary Fund (IMF) mission visited Armenia over
3-16 September, in order to conduct discussions in the context of its
second review of Armenia’s Stand-By Arrangement (SBA). On conclusion
of the visit, the mission announced that it had reached a staff-level
agreement with Armenian authorities over policies that would allow for
completion of the second review under the current SBA. Consequently,
the Executive Board of the IMF is expected to meet in late October
to discuss the review. Successful completion of this would allow
Armenia to withdraw 37.72 million Special Drawing Rights (SDR,
some $60US million) under the arrangement. The current programme
was approved in June, and the programme was amended in June, after
external and domestic financing needs had grown ever more severe due
to the intensifying economic contraction (seeArmenia: 9 March 2009:
andArmenia: 24 June 2009:).

Significance:Further external support for Armenia is crucially
important, given its dramatic economic contraction and sizeable
external financing gap. As noted by the IMF, Armenia is currently
struggling with very challenging conditions, rapid economic contraction
and a difficult global environment. However, the international
lender adds that Armenian macroeconomic policies remain on track
with the assistance programme goals, with external financial
support allowing for expansionary fiscal policy. However, the IMF
also notes that once the economy recovers, it will be important to
secure fiscal sustainability going forward, by embarking on gradual
consolidation. The international lender also reiterates that continued
progress in improving tax administration will be critical in this
context. In addition, while inflation is at present in line with
targets, notwithstanding the recent liquidity support, the Central
Bank of Armenia (CBA) should remain ready to adjust its policy stance
toward a tighter position, if the current crisis still depends or
inflationary pressures prove stronger than expected.