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.
