IMF Executive Board Completes Fourth Review of Armenia’s Extended Arrangement
IMF News, December 7, 2016
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- IMF Executive Board Completes Fourth Review of Armenia’s Extended Arrangement
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- Published: December 7, 2016
Review outcome and financing
- The Executive Board completed the fourth review of Armenia's performance under a three-year arrangement under the Extended Fund Facility (EFF).
- The completion enables the release of SDR 15.65 million (about US$21.24 million).
- Total disbursements under the arrangement are SDR 66.52 million (about US$90.28 million).
- The extended arrangement size is SDR 82.21 million (about US$111.57 million), approved on March 7, 2014 (Press Release No. 14/88).
- The Executive Board approved the authorities’ request for a modification of the end-December 2016 fiscal balance performance criterion.
Fiscal performance and policy priorities
- Revenue shortfall drivers:
- Mainly due to exogenous factors.
- Higher capital expenditure, externally financed at concessional terms, largely reflects a catch-up of past under-execution and provides some counter-cyclical support.
- Authorities’ commitments and plans:
- Remain committed to fiscal consolidation and debt sustainability, embodied in their fiscal rule aiming to ensure that debt remains below 60 percent of GDP over the medium term.
- Developed a fiscal consolidation plan for 2017 and beyond; implementation should be growth-friendly.
- New tax code should support consolidation efforts.
- Essential to implement measures to improve prioritization and monitoring of foreign-financed capital expenditure and to further strengthen revenue administration.
Monetary policy, financial sector, and macroprudential framework
- The central bank’s monetary policy easing over the past year has:
- Helped reduce key market interest rates.
- Supported a nascent recovery in bank lending.
- Policy objectives and measures:
- Objective: bring inflation closer to the CBA’s target of 4 percent while maintaining exchange rate flexibility to respond to external shocks and strengthen competitiveness.
- Enforce new minimum capital requirements.
- Integrate financial stability considerations into the CBA’s operational framework to support the financial sector’s resilience and strengthen the macroprudential framework.
Structural reforms and growth
- Pursuing further structural reforms remains essential for fostering sustainable and inclusive growth.
- Strengthening domestic competition and regulatory reforms are pivotal to creating a more broad-based, private sector-led economy.
- Authorities’ planned amendments to the law for enhancing economic competition protection are an important step.
Selected Economic and Financial Indicators, 2014–18 (as published)
- National income and prices:
- Real GDP (percent change): 2014: 3.6; 2015: 3.0; 2016: 2.2; 2017 (CR No. 16/246 1/ Prel. Proj.): 2.4; 2018: 2.5; 2.7
- Gross domestic product (in billions of drams) 2/: 2014: 4,829; 2015: 5,032; 2016: 5,297; 2017: 5,151; 2018: 5,646; 5,405; 5,762
- Gross domestic product per capita (in U.S. dollars): 2014: 3,889; 2015: 3,521; 2016: 3,589; 2017: 3,568; 2018: 3,715; 3,626; 3,790
- CPI (period average; percent change): 2014: 3.7; 2015: -0.4; 2016: -1.4; 2017: 4.0; 2018: 1.6; 3.5
- CPI (end of period; percent change): 2014: 4.6; 2015: -0.1; 2016: 1.0; 2017: -0.5; 2018: 2.8
- GDP deflator (percent change) 2/: 2014: 2.3; 2015: 1.2; 2016: 0.0
- Money and credit (end of period):
- Reserve money (percent change): 2014: 3.9; 2015: 5.8; 2016: 4.9; 2017: 6.7; 2018: 8.8; 8.0
- Broad money (percent change): 2014: 8.9; 2015: 10.7; 2016: 5.5; 2017: 13.9; 2018: 10.5
- Central government operations (in percent of GDP):
- Revenue and grants: 2014: 22.0; 2015: 21.5; 2016: 21.2; 2017: 21.6; 2018: 21.8; 22.2
- Of which : tax revenue: 2014: 21.1; 2015: 20.1; 2016: 20.0; 2017: 19.5; 2018: 20.5; 20.2; 20.6
- Expenditure: 2014: 24.0; 2015: 26.4; 2016: 25.6; 2017: 27.1; 2018: 24.4; 24.6; 24.2
- Overall balance on a cash basis: 2014: -2.1; 2015: -4.8; 2016: -4.1; 2017: -5.9; 2018: -2.8; -2.0
- Public and publicly-guaranteed debt (in percent of GDP): 2014: 43.6; 2015: 48.8; 2016: 52.4; 2017: 54.7; 2018: 54.0; 56.4; 56.8
- Share of foreign currency debt (in percent): 2014: 86.2; 2015: 86.9; 2016: 87.0; 2017: 85.5; 2018: 85.0; 81.4
- External sector:
- Exports of G&S (in millions of U.S. dollars): 2014: 3,319; 2015: 3,137; 2016: 3,059; 2017: 3,384; 2018: 3,585; 3,845
- Imports of G&S (in millions of U.S. dollars): 2014: -5,487; 2015: -4,418; 2016: -4,041; 2017: -4,327; 2018: -4,202; -4,672; -4,778
- Exports of G&S (percent change): 2014: 5.2; 2015: -5.5; 2016: -2.6; 2017: 7.9; 2018: 5.9; 7.3
- Imports of G&S (percent change): 2014: 0.2; 2015: -19.5; 2016: -7.3
- Current account balance (in percent of GDP): 2014: -7.6; 2015: -2.7; 2016: -3.0; 2017: -2.9; 2018: -3.4; -4.0
- Debt service ratio (in percent of exports of G&S) 3/: 2014: 8.6; 2015: 12.5; 2016: 7.2; 2017: 9.2; 2018: 8.1; 8.3
- Gross international reserves (in millions of U.S. dollars): 2014: 1,489; 2015: 1,771; 2016: 1,858; 2017: 1,953; 2018: 1,959; 1,981; 2,137
- Import cover 4/: 2014: 5.3; 2015: 5.0; 2016: 5.4
- End-of-period exchange rate (dram per U.S. dollar): 2014: 475; 2015: 484; 2016: …
- Average exchange rate (dram per U.S. dollar): 2014: 416; 2015: 478; Sources: Armenian authorities; and IMF staff estimates and projections.
Press Release No. 16/546, IMF, December 7, 2016.