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IMF presents fairly positive Article IV assessment of Armenian polic

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  • IMF presents fairly positive Article IV assessment of Armenian polic

    Global Insight
    February 6, 2013


    IMF presents fairly positive Article IV assessment of Armenian
    policies and reforms

    by: Venla Sipila



    The Executive Board of the International Monetary Fund (IMF) has
    concluded its 2012 Article IV consultation with Armenia, and discussed
    the Ex-Post assessment of Armenian performance in the Fund-supported
    programmes. It also concluded the fifth review of Armenia's Extended
    Fund Facility and Extended Credit Facility arrangements. The Board
    commended Armenia's economic and financial policies, noting that these
    have contributed to a sustained economic recovery since the 2009
    crisis. Fiscal consolidation has progressed, helping to curb growth of
    debt, and suppressing the wide current-account deficit. In addition,
    the Board noted that the monetary policy stance was appropriate, as it
    has kept inflation under control and managed to anchor inflation
    expectations. The Fund directors also noted welcome progress in
    structural reforms. However, in all of these key aspects of
    transition, the Board also called for further progress. First, further
    measures to strengthen fiscal revenues are necessary, especially given
    the still high needs for social and investment spending. Second, the
    monetary policy framework, including the monetary transmission
    mechanism, needs to be further strengthened. The Fund also advocated
    greater exchange rate flexibility as means of narrowing the
    current-account gap. Third, further steps in structural reforms need
    to include measures to strengthen governance and to improve the
    business environment, competitiveness, as well as to support
    diversification of exports.

    Significance:The latest IMF assessment echoes its previous similar
    statements, also supporting our current view of the Armenian economy;
    the country has already achieved significant progress on its
    transition path, but a considerable amount of work still needs to be
    done. Further steps in improving the fiscal administration, in
    particular, and in developing the monetary policy tools are important
    so as to increase future growth potential and to secure macroeconomic
    stability, and in order to create a competitive business environment.
    A key area to tackle in the economy that is also related to all the
    above-mentioned aspects of economic development is also the task of
    curbing dollarisation. Armenian external financing needs are still
    high, and its reform needs vast - thus, it is extremely important,
    both regarding near-term liquidity and longer-term economic
    development, that a good relationship with the IMF continues.

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