Armenia and WB sign a US$50 million development policy finance operation

ArmInfo. Armenia and the World  Bank have signed a US$50 million development policy finance operation  to support the Government's reforms program across key economic  areas, the WB news release says. The Fourth Development Policy  Financing (DPF-4) for Armenia supports a wide range of reforms  promoting fiscal, social and environmental sustainability and  strengthening competitiveness. This is the last operation in a  programmatic series of four DPFs spanning 2013-2016. 

"We aim to support macroeconomic stability in Armenia. This operation  will help to improve the country's competitiveness and business  environment, and enhance employment opportunities", said Laura E.  Bailey, World Bank Country Manager for Armenia. "The DPF series are  based on a longstanding partnership between the Bank and Armenia and  builds on previous operations.  The current series is focused on  supporting the Government in addressing challenges faced by the  country with high external vulnerability and persistent  unemployment."

The first pillar of this operation includes measures for improving  the financial sustainability of key sectors and the efficiency of  social protection programs while enhancing environmental safeguards  in the mining industry, which accounts for over half of Armenia's  exports. The second pillar, on improving competitiveness, focuses on  strengthening the business environment and improving trade  facilitation and connectivity, as well as access to credit. 

Key milestones supported by this operation include the enactment of  the Unified Tax Code, which will address shortcomings in the tax  system, and increase the fiscal space for growth-enhancing capital  investment and social spending. It includes measures to enhance  revenues, improve the efficiency, transparency and equity of the tax  system, and to strengthen tax administration.

"The new Code is a major step forward in the tax policy reform, as it  unifies and harmonizes what were previously two different sets of tax  laws, bringing them together into a single Code. The Code will reduce  the risk of rule duplication and, more importantly, of  inconsistencies across different tax laws. By revisiting the level  and structure of income taxes, reducing the number of exemptions and  tax gaps, increasing excise taxes and strengthening coverage of  high-wealth individuals and large companies, the Code will lead to  higher revenue mobilization in the medium- term," said Gohar  Gyulumyan, World Bank Co-Task Team Leader of the Project.

The program supports several reforms aimed at enhancing environmental  safeguard legislation.  In particular, the amendments to the Mining  Code to align with the Law on Waste Management will reduce the  negative environmental impacts from mining operations and preserve  the asset endowment for households in rural areas, which often depend  on income from agricultural activity. 

Another focus area of this operation is improvement in the business  environment, through enactment of the amendments to the Law on  Bankruptcy, which strikes a better balance between creditors' and  debtors' rights. The operation also supports increasing transparency  and reliability of the financial sector by enacting regulations to  ensure disclosure of beneficial ownership of financial institutions  and groups.

The Fourth DPF, totaling US$50 million, is an IBRD loan with a fixed  spread with a 14.5-year grace period and repayment of 25 years.

Since joining the World Bank in 1992 and IDA in 1993, total IDA and  IBRD commitments to Armenia amount to US$2.3 billion.