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IMF Approves $15 Million Disbursement to Armenia

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  • IMF Approves $15 Million Disbursement to Armenia

    Federal Information and News Dispatch, Inc.
    State Department
    May 4, 2004

    IMF Approves $15 Million Disbursement to Armenia; Fund completes
    fifth review of three-year, $100 million program

    TEXT: The International Monetary Fund (IMF) has completed the fifth
    review of Armenia's economic performance under a three-year program
    designed to reduce poverty and spur economic growth, and on May 3
    announced another disbursement to Armenia of about $15 million.

    The IMF also approved a request to extend the arrangement by seven
    months to December 31.

    IMF Deputy Managing Director and Acting Chairman Agustn Carstens
    commended Armenia for the "satisfactory implementation of
    macroeconomic policies and structural measures" under the program,
    which contributed to a strong economic performance in 2003.

    Carstens also suggested further measures Armenia should take in its
    economic reform program.



    Following is an IMF press release with Carstens' statement:

    (begin text)

    International Monetary Fund

    Washington, D.C.

    May 3, 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 1/2-year grace
    period on principal payments.

    Following the Executive Board discussion, Agustn 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.

    (end text)

    (Distributed by the Bureau of International Information Programs,
    U.S. Department of State.)
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