Citing a “request” by the Armenian authorities, the IMF said it has cut short its “stand-by arrangement,” or SBA, a 28-month lending program launched in March 2009 to help the country cope with its worst economic crisis since the early 1990s.
In June 2009, the fund increased the amount of promised emergency funding by more than half to about $830 million because of a sharper-than-anticipated impact of the global recession on the Armenian economy.
The authorities in Yerevan have received roughly $560 million worth of loans under the SBA. The money has been used for replenishing their hard-currency reserves and financing increased state budget deficits.
In a statement circulated by its Yerevan office, the IMF said Armenia’s ongoing economic recovery is necessitating a change in the authorities’ economic needs and priorities. “Policies supported under the Stand-By Arrangement (SBA) were instrumental in maintaining economic and financial stability and mitigating the impact of the crisis on the poor,” the fund’s deputy managing director, Murilo Portugal, was quoted as saying.
“As the economy recovers, the authorities are renewing their focus on medium-term challenges: achieving strong growth and poverty reduction, debt sustainability, and financial sector stability,” Portugal added. “To this end, the authorities have requested the cancellation of the SBA and a new three-year Extended Fund Facility and Extended Credit Facility arrangement.”
The two programs are each worth $197.4 million. The money is to be fully disbursed, in several installments, by July 2013. The IMF’s Executive Board approved the immediate release of the first tranche, worth $53.6 million, at a meeting in Washington late on Monday.
“The program objectives are to restore fiscal and external sustainability, preserve financial stability, and support growth and poverty reduction,” read the IMF statement.
Portugal specified that the Armenian government has committed itself to significantly cutting the budget deficit, improving tax administration and maintaining “exchange rate flexibility.” He said these and other “structural reforms” are essential for sustainable economic growth in the country.
“Key elements in this regard include fighting corruption, stepping up public investment, simplifying the tax regime, regulations, reporting requirements, and increasing competition,” added the IMF official.
Official statistics show Armenia’s Gross Domestic Product soaring by 8.8 percent in the first five months of this year. It shrunk by as much as 14.2 percent in 2009.