Friday, April 10 2020 16:31

ArmInfo. An International Monetary Fund (IMF) team led by Nathan Porter conducted discussions on the second review of Armenia's reform program supported by the IMF  Stand-By Arrangement (SBA) during March 12-April 8, 2020, the press  release of the IMF informs.  At the conclusion of the mission, Mr.  Porter issued the following statement:

''IMF team reaches a staff level agreement with the Armenian  authorities for the completion of the second review of Armenia's  reform program, which is supported by the IMF. The authorities have  requested an increase in financial support provided by the IMF for  Armenia and, pending Executive Board approval, around $280 million  will be available immediately after the Board meeting.

IMF considers that the COVID-19 pandemic, together with the recent  oil price shock and the tightening of global financial conditions,  will significantly change Armenia's near-term economic outlook and  prompt a deterioration of its external and fiscal accounts. Higher  access to IMF financing will help the authorities contain short-term  risks and will provide resources to meet urgent medical and  socio-economic needs during the peak of the virus outbreak, the IMF  report notes. 

 "We are happy to announce that the IMF team reached a staff-level  agreement with the Armenian authorities on the conclusion of the  second review under their economic reform program supported by a  three-year SBA. The agreement is subject to approval by the IMF's  Executive Board, which is scheduled to consider the review in  mid-May. The staff will also recommend an increase in IMF financial  support for Armenia by SDR128.80 million (about US$175 million),  which together with the authorities' intention to draw purchase  rights accumulated under the SBA would make SDR 206 million (about  US$280 million) available to be disbursed immediately after the Board  meeting, Nathan Porter noted.

Such an increase is justified in the context of the urgent balance of  payments financing needs resulting from the consequences of the  spread of the COVID-19 virus. This financing will be allocated to the  budget to help the authorities' efforts in meeting urgent medical and  socio-economic needs during the peak of the virus outbreak, thereby  preserving the gains in economic potential and inclusion that Armenia  has achieved over recent years.

It should be noted that in the same press release, the IMF presented  an updated forecast for Armenia for 2020, expecting GDP growth at the  level of -1.5%, for the state debt - over 60% of GDP, for the state  budget deficit - an increase of up to 5% of GDP. The IMF made such a  forecast for the Armenian economy, given the restrictions on internal  mobility and activity associated with COVID, significantly lower  external demand, more stringent financial conditions and disruptions  in global trade and supply chains. And the forecasted 2020 increase  in the ratio of the state budget deficit to GDP is caused by a  decrease in income and an increase in spending on health care and  economic support.

To recall, a year earlier, on May 17, 2019, the International  Monetary Fund (IMF) approved providing Armenia with a stand-by credit  line for the three-year "transit period" in the amount of SDR 180  million (equivalent to almost $ 248.2 million) or about 139.75% of  Armenia's quota in IMF. Out of this amount, it was planned to  immediately receive 25.714 million SDR (equivalent to almost $ 35.5  million), and the provision of the rest was provided on the basis of  six semi-annual estimates.

These loan funds are aimed at strengthening the economic foundations  and policies of Armenia, as well as conducting structural reforms, in  particular, improving management efficiency and improving the  business environment. This loan was provided to neutralize  macro-risks, namely, internal "transit" risks and possible external  shocks caused by the possible increase in sanctions against Armenia's  main trading partner, Russia, creating uncertainty, both in terms of  a possible "subsidence" of production and export volumes, as well as  the plan of risks of reducing the transfer component of the economy.  The ability of these factors to influence the level of aggregate  demand and create certain imbalances in the country's balance of  payments was taken into account.