EFSD Assessed Accessibility of Macroeconomic Stabilization Financing  in Armenia

ArmInfo. The Eurasian Fund for  Stabilization and Development (EFSD, Fund), has published a working  paper "Global Financial Safety Net in Eurasia: Accessibility of  Macroeconomic Stabilization Financing in Armenia, Belarus,  Kyrgyzstan, and Tajikistan". The analysis is of particular importance  in the context of the current crisis associated with the COVID-19  pandemic, the Official Website of Organization reports.

In the course of economic crises, in order to mitigate their  consequences, as well as immediately after the crises, in order to  achieve macroeconomic stability, countries turn to various sources of  concessional financing. In the Eurasian region, the data collected by  the authors reveals two peaks that coincide with two crises and their  aftermaths, i.e. a global one (2009-2010) and a regional one  (2014-2015). 

In the working paper authors take into account six sources of  financing - international reserves, swap arrangements, EFSD, IMF,  multilateral development banks and bilateral financial support for  macrostabilization. "From 2009 to 2019, Armenia, Belarus, Kyrgyzstan  and Tajikistan used all the above-mentioned stabilization-financing  instruments, - comments Evgeny Vinokurov, EFSD Chief Economist, - The  use of stabilization financing sources has been cyclical and linked  to economic crises". Over the decade, the countries were experiencing  the consequences of the 2008-2009 global financial crisis, as well as  the end-of-2014 external economic shock and the Russian ruble  depreciation. The sharpest decline in FX reserves was typical for the  end of 2014 through the beginning of 2015, when the central banks in  the region intervened to support the exchange rate amid external  economic shock and the Russian ruble devaluation. The developed  multi-layer financial support system has helped to mitigate the  impact of these shocks. 

The funds disbursed from all the sources in 2009-2019 totalled at  least $16 bln. The flow of these resources varied by country and  year. Along with the massive financial support from the IMF, Armenia  also received significant financing from the EFSD, MDBs, and Russia.  Kyrgyzstan has primarily bilateral financial assistance from Russia  and IMF financing for stabilization purposes. IMF, EFSD, and MDBs  were the three most significant sources in Tajikistan. In Belarus,  IMF, Russian bilateral assistance, and EFSD were the most significant  sources of stabilization financing.

The working paper estimates the availability of stabilization  financing for Armenia, Belarus, the Kyrgyz Republic, and Tajikistan  based on three approaches. The first approach summarizes  all available sources of stabilization financing. However, massive  depletion of the national reserves is an extreme scenario which would  result in a balance of payments' crisis. Hence, two other approaches  - with national reserves decreasing by 25% in absolute terms and not  taking into account the national reserves at all - are more practical  for purposes of analysis.