IMF MISSION REACHES STAFF-LEVEL AGREEMENT ON THIRD REVIEW UNDER STAND-BY ARRANGEMENT WITH ARMENIA

ArmInfo
2010-02-17 18:33:00

ArmInfo. An International Monetary Fund mission, led by Mark Lewis,
visited Yerevan Feb 4-17 to carry out discussions on the third review
of Armenia’s 28-month Stand-by Arrangement.

The press service of the IMF reports that at the end of the mission
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 third review
under the SBA. The staff-level agreement is subject to approval by IMF
management and the Executive Board. A discussion of the review at the
Executive Board is planned for late Mar. The completion of the third
review would enable Armenia to draw SDR 48.49mln (about US $74mln).

After a very challenging year in 2009, output appears to have
stabilized and real GDP is expected to recover in 2010. Inflation has
picked up, although this principally reflects exogenous effects linked
to the international environment, pass-though from the exchange rate
depreciation in early 2009, as well as administered price increases
during 2009. Inflation is however expected to come down from its highs
in the first quarter of 2010, and with sound policies in place, should
return to the target range in the near future. The public finance
situation is improving, and while weaknesses remain in the balance of
payments, reserves are at a comfortable level. The financial sector
is sound and has proved resilient to the shocks over the last year.

Performance under the Stand-by Arrangement continues to be good. The
authorities have successfully implemented a broad range of policies
to address the macroeconomic challenges in 2009, described in their
Letters of Intent, and macroeconomic policies are on track.

In 2010 the authorities intend to pursue economic policies to support
the recovery while managing any demand pressures that may emerge.

Fiscal policy will continue to provide support to the economy and
priority social programs, while the deficit will be reduced to 6% of
GDP from 7.5% of GDP in 2009. Monetary policy will gradually return
to a neutral stance, while providing room for credit growth. Over the
medium term, in light of debt sustainability concerns, the authorities
should gradually reduce the deficit and rely as much as possible on
concessional financing.

Continued structural reforms to boost tax administration, further
strengthen the financial sector, and additional efforts to increase
competition and raise productivity will be important contributors
to macroeconomic stability and sustained economic growth. Further
efforts in the social sectors will likewise be important to improve
social services and reduce poverty.

In the period ahead, the continued successful implementation of
the program will help solidify the economic recovery, strengthen
the balance of payments and lead to continued progress in poverty
reduction.

The mission would like to express gratitude to the authorities for
their hospitality and fruitful cooperation," Lewis said.

In Mar 2009 Armenia and IMF signed a 28-month Stand-by Arrangement
for provision of a total of US $540mln (as converted from SDR). In
June 2009 the sum was increased to US $822.7mln, of which US $300mln
is to be provided to the Government of Armenia for national budget
financing. Of this sum US $150mln was allocated in 2009, the rest is
to be given in 2010. The remaining US $522mln will be given to the
Central Bank so it can alleviate sharp short-term AMD fluctuations.

The CB has already received US $330mln.