IMF Reaches Staff-Level Agreement with Armenia on Three-Year Extended Fund Facility and Extended Credit Facility Programs

Press Release No. 10/205
May 19, 2010

An International Monetary Fund (IMF) mission, led by Mr. Mark Lewis, visited Yerevan during May 6-19. At the end of the mission, Mr. Lewis issued the following statement:

“The mission reached a staff-level agreement with the authorities on a program supported by arrangements under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF). The staff level agreement is subject to approval by IMF management and the Executive Board. A discussion of the program request at the Executive Board is planned for late June. Access under the program (290 percent of quota) would total SDR 267 million (US$392 million), covering the period through June 2013. Board approval of the program would enable Armenia to draw about US$52 million.

“While economic conditions remain difficult, the Armenian economy is gradually recovering. Growth is expected to rebound in 2010, external inflows are picking up, and public finances have improved. Inflation has remained high due to various supply shocks, but should come down gradually over the course of 2010.

“Nevertheless, while the crisis has passed, important medium-term challenges have emerged: boosting growth while reducing poverty, reversing the debt build-up, and maintaining financial stability.

“In support of these objectives, the authorities have committed to a strong set of macroeconomic policies under the proposed EFF/ECF program. Fiscal policy will continue to support economic activity, but, as the recovery takes hold, budget deficits will gradually fall to keep public debt on a sustainable path. The authorities intend to widen the tax base through improvements in the tax administration. They will also further improve the targeting and efficiency of spending, while ensuring sufficient allocations for social and capital spending, and taking further steps to protect the poor by enhancing the social safety net. Maintaining low inflation will continue to be a key objective of monetary policy. With supply pressures falling back during the course of the year, inflation will likely continue to fall as well.

“On structural reforms, the program includes a strong set of tax administration reforms aimed at boosting taxpayer rights, while ultimately contributing to sound public finances and improvement of the business environment. Regarding the financial sector, the Armenian banking system has proven its resilience during the crisis. The authorities intend to continue promoting financial intermediation to support economic activity.

“The new EFF/ECF program should allow Armenia to meet its medium-term challenges, helping to sustain the economic recovery, strengthen the balance of payments, and lead to continued progress in poverty reduction.

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



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