IMF Executive Board Approves US$248.2 Million Stand-By Arrangement for Armenia
IMF News, May 17, 2019
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- Published: May 17, 2019
Objectives and policy priorities
- Primary aims:
- Support efforts to strengthen economic fundamentals and policy frameworks.
- Help effective implementation of structural reforms, particularly relating to governance and improving business climate.
- Provide insurance against external shocks via a precautionary arrangement.
- Quoted guidance from Mr. Mitsuhiro Furusawa:
- Continue reforms to support more balanced and inclusive growth by reducing imbalances, improving the business climate, strengthening governance, and advancing measures to reduce poverty and unemployment.
- Support movement toward a more dynamic, sustainable, and inclusive economy.
Fiscal policy and public finances
- Strategic orientation:
- Authorities committed to a sustainable fiscal path supported by the fiscal rule while creating space for critical spending on infrastructure and social spending.
- Program aims and measures:
- Bring central government debt to below 50 percent of GDP in the medium term.
- Enhance revenue mobilization to create space for growth-enhancing infrastructure and social spending.
- Tax reform plans to be accompanied by sustainable compensating measures to offset expected revenue shortfalls, and more targeted measures toward the poor to make the tax system more progressive.
- Structural fiscal reforms to strengthen public financial management and protect essential expenditure, including foreign-financed capital spending.
- Central government operations (in percent of GDP) — selected figures from projections:
- Revenue and grants: 21.4 (2016), 21.2 (2017), 21.7 (2018), 22.6 (2019), 22.8 (2020), 22.9 (2021), 23.2 (2022), 23.2 (2023)
- Of which: tax revenue: 20.1 (2016), 20.6 (2017), 21.0 (2018), 21.3 (2019), 21.5 (2020), 21.9 (2021)
- Expenditure: 27.0 (2016), 26.0 (2017), 23.5 (2018), 25.2 (2019), 24.7 (2020), 25.0 (2021)
- Overall balance on a cash basis: -5.6 (2016), -4.8 (2017), -2.5 (2018), -2.1 (2019), -1.9 (2020)
Financial sector resilience and market development
- Central Bank of Armenia objectives (drawing on the 2018 financial sector assessment program):
- Safeguard financial stability by improving the risk-based supervision framework.
- Strengthen macroprudential measures in light of high levels of dollarization.
- Enhance banks’ foreign currency liquidity buffers.
- Further develop capital market to mobilize a growing supply of long-term domestic capital to fund economic developments and channel it to the economy.
- Monetary policy:
- Further strengthening of the monetary policy framework to improve effectiveness and help bring inflation back to its medium-term target.
- Additional measures:
- Safeguard the financial system, further develop capital markets, and improve access to finance.
Structural reforms and inclusiveness
- Program emphasis:
- Strengthen governance and institutions.
- Improve the business environment to attract investment and ignite more inclusive and durable growth.
- Enhance social safety net programs to include better education and health care access for the most vulnerable.
- Promote private sector development, attract more FDI, and increase diversification.
- Enhance human capital and increase female labor force participation.
Economic outlook and key indicators (selected figures from Table 1: Armenia: Selected Economic and Financial Indicators, 2016–23)
- Real GDP (percent change): 0.2 (2016), 7.5 (2017), 5.2 (2018), 4.6 (2019), 4.5 (2020)
- Contributions to growth (selected):
- Final consumption expenditure, Contrib. to Growth: -0.9 (2016), 7.4 (2017), 2.7 (2018), 3.3 (2019), 3.4 (2020)
- Gross fixed capital formation, Contrib. to Growth: -2.4 (2016), 1.5 (2017), 0.8 (2018), 6.8 (2019), 5.0 (2020)
- Net exports of goods and services, Contrib. to Growth: -1.2 (2016), -1.8 (2017), -3.4 (2018), -3.1 (2019), -3.2 (2020)
- Gross domestic product (in billions of drams): 5,067 (2016), 5,569 (2017), 6,003 (2018), 6,549 (2019), 7,102 (2020), 7,745 (2021), 8,437 (2022), 9,169 (2023)
- Gross domestic product per capita (in U.S. dollars): 3,524 (2016), 3,872 (2017), 4,186 (2018), 4,533 (2019), 4,764 (2020), 5,068 (2021), 5,386 (2022), 5,710 (2023)
- Inflation:
- CPI (period average; percent change): -1.4 (2016), 1.0 (2017), 2.5 (2018), 3.0 (2019), 3.7 (2020), 4.1 (2021)
- CPI (end of period; percent change): -1.1 (2016), 2.6 (2017), 1.8 (2018), 3.8 (2019), 4.3 (2020)
- Unemployment rate (in percent): 20.2 (2016), 18.6 (2017), 18.1 (2018), 17.9 (2019), 17.7 (2020), 17.8 (2021), 17.6 (2022)
- Investment and saving (in percent of GDP):
- Investment: 18.0 (2016), 19.0 (2017), 22.4 (2018), 23.6 (2019), 24.1 (2020), 24.4 (2021), 24.9 (2022), 25.6 (2023)
- National savings: 15.8 (2016), 16.6 (2017), 13.3 (2018), 16.3 (2019), 16.8 (2020), 17.5 (2021), 18.4 (2022), 19.4 (2023)
- Money and credit (end of period):
- Reserve money (percent change): 13.1 (2016), -1.0 (2017), 9.0 (2018), 9.5 (2019), 8.5 (2020)
- Broad money (percent change): 8.1 (2016), 7.0 (2017)
- Private sector credit growth (percent change): 14.4 (2016), 16.9 (2017), 16.4 (2018), 16.0 (2019), 15.5 (2020), 13.0 (2021), 12.5 (2022), 11.0 (2023)
- Public and publicly-guaranteed (PPG) debt (percent of GDP): 56.7 (2016), 58.9 (2017), 55.8 (2018), 54.6 (2019), 53.7 (2020), 52.3 (2021), 51.1 (2022), 50.1 (2023)
- Central Government's PPG debt (in percent): 52.0 (2016), 51.4 (2017), 51.0 (2018), 50.8 (2019), 50.2 (2020), 49.5 (2021), 49.0 (2022)
- Share of foreign currency debt (in percent): 80.9 (2016), 81.1 (2017), 77.5 (2018), 77.6 (2019), 76.5 (2020), 75.4 (2021), 73.9 (2022), 74.3 (2023)
- External sector:
- Exports of goods and services (in millions of U.S. dollars): 3,500 (2016), 4,307 (2017), 4,669 (2018), 5,074 (2019), 5,361 (2020), 5,744 (2021), 6,137 (2022), 6,625 (2023)
- Imports of goods and services (in millions of U.S. dollars): -4,516 (2016), -5,710 (2017), -6,583 (2018), -7,132 (2019), -7,467 (2020), -7,892 (2021), -8,371 (2022), -8,875 (2023)
- Exports of goods and services (percent change): 11.6 (2016), 23.0 (2017), 8.4 (2018), 8.7 (2019), 5.7 (2020), 7.2 (2021), 7.9 (2022)
- Imports of goods and services (percent change): 26.4 (2016), 15.3 (2017), 8.3 (2018), 4.7 (2019), 6.1 (2020), 6.0 (2021)
- Current account balance (in percent of GDP): -2.3 (2016), -9.1 (2017), -7.3 (2018), -6.9 (2019), -6.5 (2020), -6.2 (2021)
- FDI (net, in millions of U.S. dollars): 272 (2016), 228 (2017), 266 (2018), 296 (2019), 318 (2020), 346 (2021), 376 (2022), 407 (2023)
- Gross international reserves (in millions of U.S. dollars): 2,204 (2016), 2,314 (2017), 2,249 (2018), 2,284 (2019), 2,373 (2020), 2,418 (2021), 2,468 (2022), 2,633 (2023)
- End-of-period exchange rate (dram per U.S. dollar): 484 (2016)
- Note: Sources listed as Armenian authorities; and Fund staff estimates and projections.
Context and background
- Since completion of the 2014–17 IMF-supported program, economic and financial stability has been maintained and macroeconomic policy implementation has been sound.
- Despite gradual improvements, poverty and unemployment remain relatively high, causing migration and a shrinking labor force.
- Following the 2018 peaceful political transition, the newly formed government launched a five-year economic program in February 2019 centered on advancing structural reforms to generate broad-based inclusive growth and maintain macroeconomic stability. The authorities requested the Stand-By Arrangement to support this program.
Press Release No. 19/173 — May 17, 2019 — IMF Communications Department
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- Pr19173 Arm Armenia Imf Executive Board Approves Us2482 Million Standby Arrangement for Armenia