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
