Press Release: IMF Mission Reaches Staff-Level Agreement on Second Review Of Stand-By Arrangement with Armenia

September 16, 2009

Press Release No. 09/306
September 16, 2009

An International Monetary Fund (IMF) mission, led by Mr. Mark Lewis, visited Yerevan during September 3-16 to carry out discussions on the second review of Armenia’s 28-month Stand-By Arrangement (see Press Release No. 09/68). At the end of the mission, Mr. Lewis issued the following statement:

“The mission reached a staff-level agreement with the authorities on a package of policies that aims at completing the second review under the SBA. On this basis, the IMF Executive Board is now expected to meet in late October to discuss the completion of the second review. Board approval would enable Armenia to draw SDR 37.72 million (about US $60 million).

“This has been a very challenging year for Armenia, with real GDP now expected to decline about 15 percent in 2009. In a very difficult global environment, these developments have led to some weakening in the balance of payments and the public finances, and posed additional hardships on the Armenian population.

“The authorities have implemented a broad range of policies to address these challenges, described in their Letters of Intent of March and June 2009, and macroeconomic policies are on track. Fiscal policy continues to be appropriately expansionary in light of the ongoing deep contraction of the Armenian economy. Thanks to financial support from the IMF and donors, the government has been able to keep expenditures close to the original 2009 budget, while increasing spending on high-priority infrastructure projects.

“However, given the large drop in tax revenues, the public deficit could rise up to around 7.5 percent of GDP. Once the economy recovers, the government should undertake a gradual consolidation to preserve medium-term fiscal and debt sustainability, while continuing to support needed public spending and investment. Continued progress in tax administration reforms will be critical to ensuring sound public finances, and a fair and equitable tax burden.

“The monetary policy stance has eased further, and the Central Bank (CBA) has expanded its instruments to provide liquidity to the banking system in order to unblock credit to the private sector. At the same time, inflation is on track to meet the CBA’s target. The CBA should stand ready to adjust its monetary policy stance in response to a worsening of the crisis or stronger-than-expected inflationary pressures.

“These policies should help economic conditions improve. In the period ahead, the continued successful implementation of the program will pave the way for an early return to sustainable economic growth, a strong balance of payments, and continued progress in poverty reduction.

“The mission would like to express gratitude to the authorities for their hospitality and fruitful cooperation.”

Armenia: Selected Economic and Financial Indicators, 2009–10
    2009 2010

Real GDP (percent change)

  -15.6 1.2

CPI (period average; percent change)

  3.0 3.2

Fiscal deficit (in percent of GDP)

  -7.5 -5.9

Current account balance (in percent of GDP)

  -13.7 -13.7

External debt (in percent of GDP)

  31.1 38.7




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