Friday, December 9 2016 13:24
Alexandr Avanesov

IMF Executive Board completes fourth review of Armenia`s Extended Arrangement - completion enables release of US$21.24 mln

IMF Executive Board completes fourth review of Armenia`s Extended  Arrangement - completion enables release of US$21.24 mln

ArmInfo. The Executive Board  of the International Monetary Fund (IMF) completed the fourth review  of Armenia's performance under a three-year arrangement under the  Extended Fund Facility (EFF), the official website of IMF reports.  The completion enables the release of SDR 15.65 million (about  US$21.24 million), bringing total disbursements under the arrangement  to SDR 66.52 million (about US$90.28 million). The extended  arrangement for SDR 82.21 million (about US$111.57 million) was  approved on March 7, 2014.

In completing the review, the Executive Board also approved the  authorities' request for a modification of the end-December 2016  fiscal balance performance criterion. The revenue shortfall has been  mainly due to exogenous factors, and the higher capital expenditure,  which is externally financed at concessional terms, in large part  reflects a catch-up of past under-execution and provides some  counter-cyclical support.

Following the Executive Board's discussion on Armenia, Mr. David  Lipton, First Deputy Managing Director and Acting Chair, said:

"Program performance has been broadly satisfactory despite continued  adverse external developments that have contributed to subdued  domestic demand, weak revenues, and deflationary conditions. Looking  forward, the outlook remains challenging, calling for sustained  policy efforts to secure macroeconomic and financial stability and to  foster sustainable and inclusive growth.

"Revenue shortfalls, together with counter-cyclical over-execution of  foreign-financed projects, are expected to widen the 2016 fiscal  deficit. Nevertheless, the authorities remain committed to fiscal  consolidation and debt sustainability, as embodied in their fiscal  rule, which aims to ensure that debt remains below 60 percent of GDP  over the medium term. In this context, they have developed a fiscal  consolidation plan for 2017 and beyond. It will be important to carry  out this consolidation plan in a growth-friendly manner. Moreover,  the new tax code should support the consolidation efforts, but it is  also essential to implement measures that improve the prioritization  and monitoring of foreign-financed capital expenditure and that  further strengthen revenue administration.

"The central bank's monetary policy easing over the past year has  helped reduce key market interest rates and supported a nascent  recovery in bank lending. Going forward, the objective should be to  bring inflation closer to the CBA's target of 4 percent, while  maintaining exchange rate flexibility to respond to external shocks  and strengthen competitiveness. At the same time, enforcing the new  minimum capital requirements and integrating financial stability  considerations into the CBA's operational framework will help support  the financial sector's resilience and strengthen the macroprudential  framework.

"Pursuing further structural reforms remains essential for fostering  sustainable and inclusive growth. Strengthening domestic competition  and regulatory reforms are pivotal to creating a more broad-based,  private sector-led economy. In this context, the authorities' planned  amendments to the law for enhancing economic competition protection  is an important step."


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