Wednesday, June 24 2020 19:02

ArmInfo.At an extraordinary meeting on June 24, the Armenian parliament ratified the agreement of the Republic of Armenia with the International Monetary Fund (IMF) on raising a loan of $ 280 million to fight COVID-19.

According to the Deputy Minister of Finance of Armenia Armen  Hayrapetyan, according to IMF forecasts the end of last year, in 170  countries of the world envisaged economic growth. Meanwhile,  according to the forecast revised in April this year, due to the  coronavirus epidemic, a 3.5% decline is expected in the world  economy. These indicators, as the deputy minister noted, cannot but  affect budget indicators, since the crisis will lead to a decrease in  tax revenues, which, in turn, will affect the countercyclical policy  of maintaining expenditures at a fixed level and increasing the state  budget deficit. To finance the deficit of the state budget of the  country, it is necessary to attract external borrowing, which will  affect the growth of public debt. At the end of last year, IMF agreed  to provide loans to Armenia in the presence of significant external  shocks. But taking into account the fact that the pandemic began to  gain momentum in March-April remotely, negotiations were held with  IMF, the results of which made a decision to increase the size of  credit allocations compared to the amount approved at the end of  2019. Now it will be $ 315, of which $ 280 million is already  available. In September of this year, another IMF mission will visit  Armenia, following which, the republic is expected to receive the  remaining $ 35 million.  On May 18, 2020, the Board of Directors of  the International Monetary Fund (IMF) decided to allocate $ 280  million to Armenia to fight against coronavirus. "The decision of the  IMF Executive Board provides for the immediate allocation of 280  million US dollars to Armenia," the fund said in a statement. The  fund added that "access to this funding will help authorities prevent  short-term risks and provide resources to address the urgent social  and economic consequences of the COVID-19 pandemic." Earlier, ArmInfo  reported that the IMF team reached an agreement with the RA  government on the completion of the second review of the reform  program of Armenia, supported by the SBA agreement of the  International Monetary Fund. The Armenian authorities have requested  more financial support from the IMF, and are awaiting the approval of  the above amount by the Executive Council. IMF believes that the  COVID-19 pandemic, along with the recent oil price shock and  tightening global financial conditions, will significantly change  Armenia's short-term economic prospects and provoke a deterioration  in its external and fiscal accounts. "Wider access to IMF financing  will help the Armenian authorities contain short-term risks and  provide resources to meet urgent medical and socio-economic needs  during the peak of the outbreak," the IMF said. It is recommended  that IMF increase financial support for Armenia by 128.8 million SDRs  (about $ 175 million), which, together with the authorities'  intention to attract resources accumulated within the SBA, will allow  receiving 206 million SDRs (about $ 280 million), payable immediately  after Board of Directors meetings.

It should be noted that 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 almost 5% of GDP. The IMF made such a forecast for  the Armenian economy, taking into account COVID-related restrictions  on internal mobility and activity, significantly lower external  demand, tighter financial conditions and disruptions in global trade  and supply chains. And the forecasted increase in the ratio of the  state budget deficit to GDP for 2020 is caused by a decrease in  income and an increase in spending on health care and economic  support.

Recall that a year earlier,on May 17, 2019, the International  Monetary Fund (IMF) approved providing Armenia with a stand-by credit  line in the amount of SDR 180 million for the three-year "transit  period" (equivalent to almost $ 248.2 million) or about 139.75% of  Armenia's quota in IMF 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, and a plan for the risks of reducing the transfer  component of the economy. The ability of these factors to affect the  level of aggregate demand and create certain imbalances in the  country's balance of payments was taken into account.