Press Release: IMF Executive Board Approves US$127.6 Million Extended Arrangement for Armenia
IMF News, March 7, 2014
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- Published: March 7, 2014
Approval and financing
- The Executive Board approved a 38-month SDR 82.21 million (about US$127.6 million, or 89.4 percent of Armenia’s quota) Extended Fund Facility (EFF) arrangement with the Republic of Armenia.
- The approval enables the disbursement of SDR 11.74 million (about US$18.2 million) immediately; the remaining amount will be phased over the duration of the program, subject to semi-annual program reviews.
Program objectives
- Support a rebound in economic activity.
- Further progress in poverty reduction.
- Inflation stabilization.
- Reduction in outstanding fiscal and external vulnerabilities.
- Sustain Armenia’s access to international financial markets and, by closing balance of payments gaps, pave the way for an exit from IMF support by the end of the program period, barring major shocks.
Executive Board assessment (Ms. Nemat Shafik, Deputy Managing Director and Acting Chair)
- Past performance: Sound performance under the 2010–13 EFF and Extended Credit Facility arrangements, but growth and inflation remain volatile; external current account deficit continues to be large; poverty and unemployment remain high.
- Program purpose: Support authorities in addressing macroeconomic challenges and transforming Armenia into a dynamic emerging market.
- Ownership: Maintaining strong ownership of the program is essential to successful implementation.
Policy measures and priorities
- Fiscal policy
- Will play a central role: support growth in 2014 with a modest stimulus, and move to gradual consolidation in 2015–17.
- Aim to reduce the headline deficit over the program period and place public debt on a declining path.
- Delivering planned revenue gains and reducing under-execution of the public investment budget are essential.
- Set up institutional structures to monitor and mitigate fiscal risks.
- Monetary and exchange rate policy
- Continue to be framed by inflation targeting in the context of a flexible exchange rate regime.
- Program policies focus on continued improvements in monetary operations, communications, and modeling.
- Financial sector policy
- Promote resilience to shocks and greater financial deepening.
- Target implementation of remaining recommendations of the IMF’s 2012 Financial Sector Assessment Program (FSAP) Update.
- Structural reforms
- Support medium-term growth by improving the business climate, strengthening institutions, improving connectivity and competition, creating a stronger environment for private and foreign direct investment, and tackling key risks, especially in the energy sector.
- Smooth accession to the Eurasian Customs Union, together with continuing growth of trade and other links with the European Union, is seen as essential to diversify markets, products, financial flows, and investors.
Risks and outlook
- Risks to the new program appear manageable.
- Armenia’s repayment capacity remains robust.
- Barring major shocks, balance of payments gaps should close by the end of the program period and the country should sustain access to international financial markets.
Recent developments (Annex summary)
- Despite sound performance under the 2010–13 IMF-supported program, challenges remain: macroeconomic stabilization, reduction of vulnerabilities, and medium-term growth dynamics.
- Inflation and growth remain highly volatile; growth slowdown and inflation increase in 2013 illustrate this volatility.
- External current account deficit and dollarization remain high, keeping the economy vulnerable to shocks.
- Poverty and unemployment remain high; transition away from a pre-crisis construction-led growth model has been slow.
- Major 2013 developments: a 7-year debut Eurobond issued in September; announcement of intent to seek accession to the Eurasian Customs Union.
Key statistics from "Armenia: Selected Economic and Financial Indicators, 2009–16"
- Real GDP (percent change): 2009: -14.1; 2010: 2.2; 2011: 4.7; 2012: 7.1; 2013: 5.1; 2014: 3.2; 2015: 4.3; 2016: 4.5.
- Gross domestic product (in billions of drams): 2009: 3,142; 2010: 3,460; 2011: 3,778; 2012: 3,998; 2013: 4,351; 2014: 4,290; 2015: 4,714; 2016: 5,123; 5,578 (note table lists an extra value).
- Gross domestic product (in millions of U.S. dollars): 2009: 8,648; 2010: 9,260; 2011: 10,142; 2012: 9,950; 2013: 10,365; 2014: 10,547; 2015: 11,216; 2016: 11,609; 12,039 (note table lists an extra value).
- Gross domestic product per capita (in U.S. dollars): 2009: 2,661; 2010: 2,838; 2011: 3,097; 2012: 3,033; 2013: 3,153; 2014: 3,208; 2015: 3,405; 2016: 3,517; 3,640 (note table lists an extra value).
- CPI (period average; percent change): 2009: 3.5; 2010: 7.3; 2011: 7.7; 2012: 2.5; 2013: 4.0; 2014: 5.8; 2015: 5.0.
- CPI (end of period; percent change): 2009: 6.7; 2010: 8.5; 2011: 5.6.
- Investment (in percent of GDP): 2009: 33.8; 2010: 29.4; 2011: 27.0; 2012: 22.8; 2013: 24.5; 2014: 23.9; 2015: 24.4; 2016: 24.9; 25.5.
- National savings (in percent of GDP): 2009: 18.0; 2010: 14.6; 2011: 16.1; 2012: 11.6; 2013: 14.4; 2014: 15.5; 2015: 17.3; 2016: 18.1; 18.9.
- Reserve money (percent change, end of period): 2009: 13.8; 2010: -0.8; 2011: 32.3; 2012: 1.9; 2013: 10.3; 2014: 29.9; 2015: 9.0.
- Broad money (percent change, end of period): 2009: 16.4; 2010: 10.6; 2011: 23.6; 2012: 19.6; 2013: 15.9; 2014: 15.2; 2015: 11.3.
- Commercial banks' 3-month lending rate (in percent): 2009: 19.1; 2010: 17.7; 2011: 20.7; 2012: 18.5; 2013: 18.3.
- Central government revenue and grants (in percent of GDP): 2009: 20.9; 2010: 21.2; 2011: 22.1; 2012: 22.3; 2013: 23.2; 2014: 23.3; 2015: 23.5.
- Central government expenditure (in percent of GDP): 2009: 28.6; 2010: 26.2; 2011: 25.0; 2012: 25.8; 2013: 25.9; 2014: 25.4.
- Overall balance on a cash basis (in percent of GDP): 2009: -7.9; 2010: -4.6; 2011: -2.8; 2012: -1.5; 2013: -2.3; 2014: -2.5; 2015: -2.0; 2016: -1.8.
- Public and publicly-guaranteed debt (in percent of GDP): 2009: 40.2; 2010: 39.7; 2011: 42.0; 2012: 44.0; 2013: 43.5; 2014: 45.4; 2015: 45.2; 2016: 46.0; 46.2.
- Share of foreign currency debt (in percent): 2009: 88.9; 2010: 87.4; 2011: 86.8; 2012: 86.9; 2013: 86.4; 2014: 84.8; 2015: 84.4; 2016: 84.9.
- Exports of goods and services (in millions of U.S. dollars): 2009: 1,336; 2010: 1,937; 2011: 2,407; 2012: 2,440; 2013: 2,699; 2014: 2,583; 2015: 2,757; 2016: 2,932; 3,123.
- Imports of goods and services (in millions of U.S. dollars): 2009: -3,683; 2010: -4,212; 2011: -4,797; 2012: -4,907; 2013: -5,135; 2014: -5,022; 2015: -5,155; 2016: -5,365; -5,596.
- Current account balance (in percent of GDP): 2009: -15.8; 2010: -14.8; 2011: -10.9; 2012: -11.2; 2013: -10.0; 2014: -8.4; 2015: -7.2; 2016: -6.8; -6.6.
- FDI (net, in millions of U.S. dollars) 3/: 2009: 725; 2010: 562; 2011: 447; 2012: 474; 2013: 440; 2014: 549; 2015: 413; 2016: 432; 472.
- External debt (in percent of GDP): 2009: 56.4; 2010: 66.4; 2011: 71.5; 2012: 76.2; 2013: 76.0; 2014: 79.3; 2015: 77.0; 2016: 77.7; 78.1.
- Public debt (o.w., in percent of GDP) 4/: 2009: 35.7; 2010: 34.7; 2011: 36.4; 2012: 38.2; 2013: 37.6; 2014: 38.5; 2015: 38.1; 2016: 38.8; 39.2.
- Gross international reserves (in millions of U.S. dollars): 2009: 2,004; 2010: 1,866; 2011: 1,869; 2012: 1,799; 2013: 1,467; 2014: 2,253; 2015: 2,193; 2016: 2,278; 2,376.
- Import cover (months of next year's imports of goods and services, including SDR holdings): 2009: 5.7; 2010: 4.6; 2011: 3.3; 2012: 5.2.
- Nominal effective exchange rate (percent change) 6/: 2009: -2.6; 2010: -7.3.
- Real effective exchange rate (percent change) 6/: 2009: -7.5; 2010: 1.3; 2011: 0.0; 2012: -6.1.
- End-of-period exchange rate (dram per U.S. dollar): 2009: 378; 2010: 363; 2011: 385.8; 2012: 403.6; 2013: 405.6.
- Average exchange rate (dram per U.S. dollar): 2009: 374; 2010: 372.5; 2011: 401.8; 2012: 406.8.
- Poverty rate (in percent): 2009: 34.1; 2010: 35.8; 2011: 35.0; 2012: ... (ellipsis in source).
Press Release No. 14/88, March 7, 2014.