IMF COMPLETES SECOND REVIEW UNDER STAND-BY ARRANGEMENT WITH ARMENIA

Targeted News Service
November 2, 2009 Monday 4:47 PM EST

IMF Completes Second Review Under Stand-By Arrangement with Armenia,
Approves Request for Waiver of Nonobservance of Performance Criterion,
Modification of Performance Criteria, and Rephasing of Purchases

The International Monetary Fund issued the following news release:

The Executive Board of the International Monetary Fund (IMF) has
completed the second review of Armenia’s economic performance under
a program supported by a Stand-By Arrangement (SBA) and approved a
request for a waiver of nonobservance of end-September 2009 fiscal
balance performance criterion, modification of the quantitative
performance criteria for end-December 2009 to reflect the revised
macroeconomic framework and rephasing of purchases to make the amounts
scheduled to become available following the second and third review
available upon completion of the second review.

These decisions enable the immediate release of SDR 37.72
million (about $60US million), bringing the total disbursed
to SDR 301.94 million (about $479US million). The 28-month
SBA was approved on March 6, 2009 (see Press Release No. 09/68
( pr0968.htm)), with
access augmented on June 22, 2009 (see Press Release No. 09/228
( /pr09228.htm)).

Following the Executive Board’s discussion on Armenia, Mr. Takatoshi
Kato, Deputy Managing Director and Acting Chair, stated:

"The global crisis has continued to have a serious impact on the
Armenian economy. While output appears to be stabilizing, the fall
in remittances and the collapse in the construction sector have
caused a more severe economic contraction and lower fiscal revenue
than anticipated in the first review. The authorities have fully
implemented their economic program, which calls for the continuation
of fiscal and monetary easing and a flexible exchange rate.

"In light of continuing weak domestic demand, the authorities will
maintain fiscal easing this year, with external resources taking up
the revenue slack. Expenditure will focus on undertaking anti-crisis
measures, increasing capital spending, and protecting social spending.

The authorities are committed to starting fiscal consolidation in
2010, with a view to ensuring medium-term debt sustainability. The
program allows for additional spending should more donor financing
become available to smooth the withdrawal of fiscal stimulus.

"An accommodative monetary policy stance remains appropriate given
low inflation. The move to a more flexible exchange rate has served
Armenia well, helping the economy avoid significant overvaluation and
increasing the effectiveness of monetary policy. However, given the
remaining weaknesses in the monetary transmission mechanism, targeted
measures now being implemented to stimulate credit are crucial.

"The short-term outlook remains challenging. As external conditions
improve, growth is expected to resume gradually in 2010, although
risks remain, including a slower recovery of the global economy.

Continued reforms, particularly in the areas of tax policy and
tax reform administration, the financial sector, and the business
environment will be necessary to boost the medium-term growth potential
of the economy," Mr. Kato said