The Executive Board of the International Monetary Fund (IMF) today 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 to support the authorities’ economic program. The approval enables the disbursement of SDR 11.74 million (about US$18.2 million), while the remaining amount will be phased over the duration of the program, subject to semi-annual program reviews.
The program aims to support a rebound in economic activity, further progress in poverty reduction, inflation stabilization, and a reduction in outstanding fiscal and external vulnerabilities.
Following the Executive Board discussion on Armenia, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, said:
“Armenia’s performance under the 2010–13 Extended Fund Facility and Extended Credit Facility arrangements was sound. However, growth and inflation remain volatile, the external current account deficit continues to be large, and poverty and unemployment are still high. The new 38-month extended arrangement with the Fund aims to support the authorities in addressing these challenges and to sustain Armenia’s access to international financial markets.
“Fiscal policy will play a central role in the program, supporting growth in 2014 and reducing the headline deficit over the rest of the program period to build up policy buffers. Delivering planned revenue gains and reducing the under execution of the public investment budget will be essential for successful implementation of the fiscal strategy. Another key measure in the fiscal area is setting up institutional structures to monitor and mitigate fiscal risks.
“Under the authorities’ program, monetary policy will continue to be framed by inflation targeting in the context of a flexible exchange rate regime. For the financial sector, policy will be geared towards promoting resilience to shocks and greater financial deepening.
“Growth-enhancing structural reforms will also play a central role in the new program, given the objective of transforming Armenia into a dynamic emerging market. In this context, smooth accession to the Eurasian Customs Union, along with continuing growth of trade and other links with the European Union, will be essential to achieve diversification of markets, products, financial flows, and investors.
“Risks to the new program appear to be manageable, and Armenia’s repayment capacity remains robust. The authorities have a long track record of sound macroeconomic policies but maintaining a strong ownership of the program will be essential to its successful implementation.”