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IMF completes 5th review under PRGF for Armenia...

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  • IMF completes 5th review under PRGF for Armenia...

    noticias.info (press release), Spain
    May 4 2004

    IMF Completes Fifth Review Under PRGF for the Republic of Armenia,
    Approves Request for Extension of the Arrangement Through December
    2004

    The Executive Board of the International Monetary Fund (IMF) today
    completed the fifth review of the Republic of Armenia's economic
    performance under a three-year Poverty Reduction and Growth Facility
    (PRGF) arrangement, and approved a request for the extension of the
    arrangement by seven months to December 31, 2004. The completion of
    the review enables Armenia to draw an amount equivalent to SDR 10
    million (about US$15 million).

    Armenia's PRGF arrangement for the equivalent of SDR 69 million
    (about US$100 million) was approved on May 21, 2001 (see Press
    Release No. 01/25). So far, the equivalent of SDR 50 million (about
    US$73 million) have been disbursed.

    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 reduce 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.

    Following the Executive Board discussion, Agustín Carstens, Deputy
    Managing Director and Acting Chair, said:

    "The Armenian authorities should be commended for the satisfactory
    implementation of macroeconomic policies and structural measures
    under the PRGF-supported program. These policies have contributed to
    an improved business environment and a strong economic performance in
    2003.

    "Raising revenues and reforming tax and customs administration remain
    critical objectives in the period immediately ahead. The recent
    reduction in VAT exemptions and reform of the profit tax are welcomed
    steps in this regard, but further efforts are needed to improve the
    tax system and generate resources for poverty reduction. In
    particular, it will be important to improve the transparency of tax
    and customs operations, ensure the equal treatment of taxpayers, and
    implement risk-based audit systems. Additional steps are needed in
    the medium term to strengthen the overall coherence of the tax system
    and the management of the tax and customs agencies.

    "Recent increases in bread and utility prices pose the risk of
    rekindling inflationary expectations, and the central bank will need
    to maintain a tight monetary policy to bring inflation down to its
    goal of 3 percent by end-2004. To further develop Armenia's financial
    system, it will be important to build capacity and promote sound
    corporate governance in the banking system, and strengthen the legal
    framework and the judiciary.

    "The recent process of fiscal decentralization has the potential to
    improve the quality and efficiency of services delivered by
    state-owned noncommercial organizations in the health, water, and
    education sectors. Complementary capacity building initiatives and a
    properly functioning reporting framework remain essential to ensure
    transparency and accountability in the operations of these entities.

    "Other structural reforms will be important to sustain growth and
    reduce poverty in the medium term. The anti-corruption strategy needs
    to be implemented forcefully and in consultation with civil society.
    The authorities are encouraged to move forward with their plans to
    reform the energy and water sectors, including establishing market
    rules for electricity trading, and liquidating the state-owned
    company Armenergo," Mr. Carstens said.



    IMF EXTERNAL RELATIONS DEPARTMENT
    Public Affairs: 202-623-7300 - Fax: 202-623-6278
    Media Relations: 202-623-7100 - Fax: 202-623-6772
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