IMF staff reaches staff-level agreement with Armenia on Precautionary  Stand-By Arrangement

ArmInfo.The Armenian authorities and IMF staff reached a staff- level agreement on a  3-year precautionary Stand-By Arrangement (SBA). The agreement is  subject to approval by the IMF Executive Board and is expected to be  considered in December 2022, the IMF reports.

The proposed arrangement will support the government's economic  program to achieve investment-driven, knowledge-based, and export-led  growth, while preserving macroeconomic, fiscal, and financial  stability and reducing poverty.

At the request of the Armenian authorities, a staff team from the  International Monetary Fund, led by Ms.  Iva Petrova, visited Yerevan  from September 26 to October 6 to discuss a three-year economic  program supported by an IMF precautionary Stand-By Arrangement . At  the conclusion of the discussions, including a series of virtual  meetings, Ms. Petrova issued the following statement:

"I am pleased to announce that the IMF team and the Armenian  authorities have reached a staff-level agreement on a precautionary  Stand-By Arrangement for SDR 128.8 million (about $165.6 million) to  support the government's economic program to preserve macroeconomic,  fiscal, and financial stability, and to advance reforms to promote  inclusive growth. The agreement is subject to approval by the IMF  Executive Board, which is expected to consider it in December 2022.

"Guided by sound macroeconomic policies amid significant global and  regional challenges, Armenia is on course to achieve growth of about  11 percent in 2022, in part driven by large inflows of external  income, capital, and labor into the country. Fiscal overperformance  and dram appreciation have contributed to a significant decline in  public debt, which is expected to drop to 51 percent of GDP this year  from 60.3 percent of GDP in 2021. While inflation has temporarily  increased on the back of supply and demand shocks, the Central Bank  of Armenia has proactively raised the policy rate by 625 basis points  since December 2020, aiming to steer inflation toward its medium-term  target of 4 percent. International reserves have risen, while the  dram has appreciated strongly in the past few months. Important  structural reforms have taken place in the areas of public financial  management, revenue administration, the inflation targeting  framework, the financial sector, and governance.

"Economic growth is expected to decelerate in 2023, reflecting weaker  external demand and tighter global financial conditions, and to  remain in the 4-5 percent range over the medium term. CPI inflation  is projected to gradually converge to the CBA's target over the  medium term, supported by tight monetary policy and as the impact of  external shocks wane. The current account deficit, which has widened  with the rapid growth of the economy, is expected to gradually narrow  to around 5 percent of GDP. The risks to the outlook are mainly  external.

"Given a highly uncertain outlook and overheating risks, the 2023  budget needs to avoid creating excessive demand pressures. Within the  budget envelope, priority should be given to high-quality expenditure  and strengthening the social safety net. The increase in much needed  capital spending should be supported by expanding reforms of the  public investment management proc