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IMF Completes Second Review Under Stand-By Arrangement With Armenia

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  • IMF Completes Second Review Under Stand-By Arrangement With Armenia

    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
    (http://www.imf.org/external/np/sec/pr/2009/ pr0968.htm)), with
    access augmented on June 22, 2009 (see Press Release No. 09/228
    (http://www.imf.org/external/np/sec/pr/2009 /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
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