IMF REACHES STAFF-LEVEL AGREEMENT WITH ARMENIA ON THREE-YEAR EXTENDED FUND FACILITY AND EXTENDED CREDIT FACILITY PROGRAMS

Targeted News Service
May 19, 2010 Wednesday 11:57 PM EST
WASHINGTON

The International Monetary Fund issued the following news release:

An International Monetary Fund (IMF) mission, led by Mr. Mark Lewis,
visited Yerevan during May 6-19. At the end of the mission, Mr. Lewis
issued the following statement:

"The mission reached a staff-level agreement with the authorities on
a program supported by arrangements under the Extended Fund Facility
(EFF) and the Extended Credit Facility (ECF). The staff level agreement
is subject to approval by IMF management and the Executive Board. A
discussion of the program request at the Executive Board is planned
for late June. Access under the program (290 percent of quota) would
total SDR 267 million (US$392 million), covering the period through
June 2013. Board approval of the program would enable Armenia to draw
about US$52 million.

"While economic conditions remain difficult, the Armenian economy is
gradually recovering. Growth is expected to rebound in 2010, external
inflows are picking up, and public finances have improved. Inflation
has remained high due to various supply shocks, but should come down
gradually over the course of 2010.

"Nevertheless, while the crisis has passed, important medium-term
challenges have emerged: boosting growth while reducing poverty,
reversing the debt build-up, and maintaining financial stability.

"In support of these objectives, the authorities have committed to
a strong set of macroeconomic policies under the proposed EFF/ECF
program. Fiscal policy will continue to support economic activity,
but, as the recovery takes hold, budget deficits will gradually fall
to keep public debt on a sustainable path. The authorities intend to
widen the tax base through improvements in the tax administration.

They will also further improve the targeting and efficiency of
spending, while ensuring sufficient allocations for social and capital
spending, and taking further steps to protect the poor by enhancing the
social safety net. Maintaining low inflation will continue to be a key
objective of monetary policy. With supply pressures falling back during
the course of the year, inflation will likely continue to fall as well.

"On structural reforms, the program includes a strong set of tax
administration reforms aimed at boosting taxpayer rights, while
ultimately contributing to sound public finances and improvement of the
business environment. Regarding the financial sector, the Armenian
banking system has proven its resilience during the crisis. The
authorities intend to continue promoting financial intermediation to
support economic activity.

"The new EFF/ECF program should allow Armenia to meet its medium-term
challenges, helping to sustain the economic recovery, strengthen
the balance of payments, and lead to continued progress in poverty
reduction.

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