WB to provide Armenia with a USD 50 mln loan under Fourth Development Policy Financing (DPF-4)

ArmInfo. The World Bank  will provide Armenia with a USD 50 mln loan under the Fourth  Development Policy Financing (DPF-4) to support the Government's  reforms program across key economic areas. The relevant agreement was  ratified at the Armenian National Assembly's sitting on December 23.     

Armenian Deputy Finance Minister Armen Hayrapetyan said that the  document was signed on 9 December 2016. 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.

To note, 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.

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