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Running On All Cylinders?: IMF Says Armenian Economy Needs New Engin

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  • Running On All Cylinders?: IMF Says Armenian Economy Needs New Engin

    RUNNING ON ALL CYLINDERS?: IMF SAYS ARMENIAN ECONOMY NEEDS NEW ENGINE
    Naira Hayrumyan

    ArmeniaNow correspondent

    IMF Resident Representative in Armenia Guillermo Tolosa (second from
    right); Armenian Minister of Economy Nerses Yeritsyan (far right)
    during the Monday event

    Is it time to replace the engine of the Armenian economy? The
    International Monetary Fund (IMF) believes it is. The Armenian
    government, meanwhile, says it just needs a tune up.

    On July 26, the Armenian International Policy Research Group (AIPRG)
    in cooperation with the IMF organized a panel discussion on the
    subject of "Armenia's Economic Policy: The Road Ahead". IMF Resident
    Representative in Armenia Guillermo Tolosa compared the Armenian
    economy to a motorcar that was rolling freely in 1998-2008 until it
    encountered storm gusts and ran off the road.

    The Government and the Central Bank, with the help of the IMF, got
    Armenia out of the ditch, but the engine suffered damage that now
    needs attention.

    "The new policy should also address [the need for] a new engine,
    in this case microeconomic policy," said the IMF representative.

    According to the IMF expert, the overhaul would require: an environment
    where businesses thrive, attract more workers, pay higher wages, where
    a good business climate is created, where there is a high-quality
    internet access, streamlined bureaucracy and tax payments, there is
    no abuse of power, there are clear social programs with guaranteed
    expenditures.

    In response (and continuing the motorcar metaphor), Armenian Economy
    Minister Nerses Yeritsyan noted that when there are problems with
    the engine, the question to discuss is whether it should be replaced
    or repaired. He said that the Soviet Zhiguli car (known more as Lada
    abroad) breaks down on U.S. roads as frequently as a Mercedes breaks
    down on Armenian roads.

    Thus, a metaphorical dispute about ways of the country's economic
    development was continued in Armenia. International financial
    organizations, which supported the economy during the critical period,
    insist that Armenia should accomplish a complete transition to market
    economy in which there are no monopolies and oligopolies, there is
    fair competition and black market is minimized. In comparing itself
    to a Lada, the Armenian government admits that the economy moves
    along the post-Soviet way, and it is beyond its ability to carry
    out the proposed reforms. Thus, the government admits impotence or
    unwillingness to deal with monopolies, force big business to pay taxes,
    stimulate small businesses and promote exports.

    According to Yeritsyan, it is states with knowledge-based economies
    that will be competitive in the 21st century. The minister thinks
    the priorities of the Armenian economy are the development of
    exports, innovation, promotion of business, ensuring the emergence
    of enterprises based on high technology, and only in the end, almost
    imperceptibly a structural reform of the economy. But it is this
    requirement of reform that international organizations advance as
    the principal one.

    The IMF had extended more than $800 million in credit to Armenia for
    the implementation of anti-crisis measures. Armenia's foreign debt as
    March 31, 2010 amounted to about $2.98 billion, which was an increase
    by 66.6 percent over the size of the external state debt reported for
    the same period in 2009. The amount of Armenia's foreign debt saw a
    sharp increase due to international loans, including those received
    from the IMF ($823 million), the World Bank ($545 million) and Russia
    ($500 million).




    From: A. Papazian
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