Press Release: IMF Managing Director Horst Köhler's Statement at the Conclusion of a Visit to the Republic of Armenia
November 10, 2003
"I have had the privilege during my visit to Armenia of fruitful discussions with His Excellency President Robert Kocharian, Prime Minister Andranik Margarian, Minister of Finance Vardan Khachatryan, Chairman of the Central Bank of Armenia Tigran Sargysan, and other senior officials. I also had the opportunity to meet representatives of the international donor community and civil society.
"Through this visit, I have seen at first hand Armenia's substantial progress in making the transition to a dynamic market economy. Economic performance since 2000 has been impressive, reflecting prudent monetary and fiscal policies, structural reforms, and financial support from the Armenian Diaspora. Especially noteworthy are the reduction in the public sector deficit since 1999, the clearance of domestic and external arrears, and recent privatization and restructuring in the energy sector.
"Despite these achievements, Armenia's strong growth has not brought sufficient job creation for a widespread rise in living standards, especially in rural areas. In part, this is because growth has been rather narrowly based and because of weaknesses in tax and customs collection. Thus, the recently completed Poverty Reduction Strategy Paper (PRSP) offers a promising concept to improve the living standards of all Armenians, but requires steadfast implementation of reforms.
"First, the authorities need to maintain prudent budgetary and monetary policies to ensure high economic growth and low inflation. Second, it will be important to improve the business climate by removing remaining barriers to private sector development through better governance and combating corruption. In this regard, I am pleased that the authorities are committed to a wide-ranging anti-corruption plan and I look forward to its completion, based on feedback from the public, and its prompt implementation. Third, there is a need to improve confidence in the banking system to ensure that savings are channeled to new investment that will sustain growth. Finally, the success of the government's poverty reduction strategy will depend critically on the ability of the authorities to improve health, education and other social assistance, as well as increase public investment in housing and roads. In the face of uncertainty about future external financing, resources to fund these expenditures will have to be generated from domestic sources, especially better and more even-handed tax collection. To this end, the authorities will need to move quickly to reform tax and customs administration and simplify the tax system.
"For its part, the Fund stands ready to help by better aligning our financial support through the IMF's Poverty Reduction and Growth Facility (PRGF) with Armenia's PRSP. The Fund has already lent US$56 million to Armenia under the current US$95 million three-year PRGF program, and I expect a further US$14 million to be disbursed in coming weeks."