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IMF Exec Board Completes Final Review Under PRGF Arrangement for ROA

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  • IMF Exec Board Completes Final Review Under PRGF Arrangement for ROA

    noticias.info (press release), Spain
    Dec 2 2004

    IMF Executive Board Completes Final Review Under PRGF Arrangement for
    the Republic of Armenia


    /noticias.info/ The Executive Board of the International Monetary
    Fund (IMF) today completed the sixth and final review of the Republic
    of Armenia's economic performance under a three-year Poverty
    Reduction and Growth Facility (PRGF) arrangement. The completion of
    this review enables Armenia to draw an amount equivalent to SDR 9.0
    million (about US$13.7 million).

    In completing the final review, the Executive Board also approved
    Armenia's request for a waiver of two structural performance
    criteria.

    At the time of the fifth review on May 3, 2004 the period of the
    arrangement was extended through December 31, 2004 (see Press Release
    No. 04/90). Armenia's PRGF arrangement was initially approved with
    effect from May 23, 2001 (see Press Release No. 01/25) for an amount
    equivalent to SDR 69 million (about US$105.3 million). With the
    completion of the sixth review, the arrangement will be fully
    disbursed. The authorities have also stated their intention to begin
    discussions with the IMF on a new three-year PRGF arrangement that
    would support an economic program through 2008.

    Following the Executive Board's discussion of Armenia's performance
    under the current PRGF-supported program, Agustín Carstens, Deputy
    Managing Director and Acting Chair, said:

    "The Armenian authorities should be commended for Armenia's strong
    economic performance in recent years, in the context of satisfactory
    implementation of the PRGF-supported program. Prudent monetary and
    fiscal policies, external financial support, and progress with
    structural reforms have contributed to double-digit economic growth,
    poverty reduction, low inflation, and a sustainable debt burden.

    "Looking ahead, the authorities should maintain a cautious fiscal
    stance and ensure that the expenditure envelope is in line with PRSP
    priorities on social and infrastructure spending. Monetary policy
    should remain tight while maintaining a flexible exchange rate regime
    in order to bring inflation down to the authorities' objective of 3
    percent. To facilitate further financial intermediation, reforms are
    needed to enhance corporate governance in banks, streamline
    collateral recovery procedures, and improve court processes.

    "Notwithstanding the progress made in recent years, the authorities
    need to tackle more forcefully the remaining deficiencies and reduce
    discretion in tax and customs administration. This will contribute to
    an improved business environment and yield higher tax revenues to
    finance pro-poor spending. On the expenditure side, a balanced mix
    between current and capital spending will be critical to sustain the
    high trajectory of growth. This will require higher allocations to
    capital expenditures in the transport, agriculture, and water
    sectors. At the same time, the envisaged increases in social spending
    highlight the importance of ensuring that they will be utilized
    efficiently and transparently.

    "The authorities should be commended for the improvement in the
    energy sector in recent years. Looking ahead, the authorities need to
    complete the reform agenda in this sector and step up the
    implementation of reforms in the water and irrigation sectors,
    including through an increase in tariffs to cost recovery levels.

    "Armenia's medium-term prospects are likely to remain favorable
    provided the authorities move ahead with the implementation of the
    reform agenda and redouble their efforts to improve governance," Mr.
    Castens stated.

    The PRGF is the IMF's concessional facility for low-income countries.
    PRGF-supported programs are based on country-owned poverty reduction
    strategies adopted in a participatory process involving civil society
    and development partners, and articulated in a Poverty Reduction
    Strategy Paper, or PRSP. This is intended to ensure that each
    PRGF-supported program is consistent with a comprehensive framework
    for macroeconomic, structural, and social policies, to foster growth
    and reduction poverty. PRGF loans carry an annual interest rate of
    0.5 percent, and are repayable over 10 years with a 5 ˝-year grace
    period on principal payments.
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