Friday, April 14 2023 14:13

ArmInfo.About $24.8 million of the stand-by loan will become available to Armenia after the meeting of the Board of the International Monetary Fund (IMF) in mid- June  this year. This is noted in the message of the IMF. 

In particular, it is stated in the message: "During March 9-21, 2023,  a team of the International Monetary Fund (IMF), led by Iva Petrova,  conducted discussions for the first review of Armenia's economic  reform program supported by the IMF. A Stand-By Arrangement (SBA) was  approved by the IMF's Executive Board on December 12, 2022. At the  conclusion of the discussions, Ms. Petrova issued the following  statement:

"The IMF team has reached a staff-level agreement with the Armenian  authorities for the conclusion of the first review of the economic  reform program supported by a three-year Stand-By Arrangement. The  agreement is subject to approval by the IMF's Executive Board, which  is scheduled to consider this review in mid-June, and following the  implementation of a prior action on clarifying the mandate,  transparency, reporting, and viability requirements of the Armenian  National Interest Fund. While about $24.8 million (SDR 18.4 million)  would become available after the Board meeting, the authorities plan  to continue treating the IMF-supported program as precautionary.

"The Armenian economy posted 12.6 percent GDP growth in 2022, and  economic activity has maintained strong momentum in early 2023.  Relocations of about 2,600 companies, 6000 individual entrepreneurs,  and 113 thousand non-residents to Armenia since March 2022 have  contributed substantially to this remarkable GDP growth. Annual CPI  inflation declined to 5.4 percent in March 2023 (y-o-y) from a peak  of 10.3 percent in June 2022. The headline fiscal deficit narrowed to  2.1 percent of GDP, and central government debt declined to 46.7  percent of GDP in 2022. The external position strengthened, largely  owing to booming services trade. The CBA's international reserves  increased by $870 million in 2022 and the dram appreciated by about  25 percent against the US dollar. The banking system has remained  well capitalized and highly liquid and has delivered significant  profits.

"Growth is expected to moderate but remain robust at about 5.5  percent in 2023, driven by consumption and investment. Inflation is  projected to ease further by end-2023 due to the lagged effects of  monetary policy tightening and dram appreciation, and lower imported  food and energy prices. However, risks to the outlook remain  exceptionally high amid a challenging external environment. Potential  slowdown in the global economy, tighter financial conditions, and  lower trade and capital inflows could weigh on growth. On the upside,  continued capital and migrant inflows may keep demand and  inflationary pressures high. Steadfast implementation of the  government's ambitious 2021-26 reform agenda could result in stronger  medium-term growth.  

"Given a highly uncertain outlook and overheating risks, the 2023  budget execution and 2024 budget plans need to avoid creating  excessive demand pressures. The 2024-26 medium-term expenditure  framework should strike a balance between preserving macro- fiscal  stability and supporting Armenia's development. Higher planned  spending in the 2021-26 Government Program, such as healthcare,  wages, education, social protection, and infrastructure require  careful prioritization. Efforts to improve government spending  efficiency, enhance public financial management-including through  robust fiscal risk management, transparency, and governance-and  ensure higher-quality public investment are welcome. Eliminating  inefficient tax expenditures and strengthening revenue administration  will be critical to creating needed fiscal space for priority  spending. 

"Decisive and proactive monetary policy implementation has been  successful in containing inflationary pressures, and further policy  changes should remain dependent on the evolution of inflation and  inflation expectations. Efforts to foster capital market development,  deepen financial inclusion, improve liquidity management, and enhance  the CBA's communication strategy will further strengthen the  effectiveness of monetary policy. Staff welcomes the CBA's continued  commitment to maintaining healthy reserve buffers and exchange rate  flexibility, which has helped the Armenian economy absorb the ongoing  external shocks.

"Staff welcomes the Central Bank of Armenia's plans to strengthen  risk-based supervision, develop a bank resolution framework aligned  with international standards, and incentivize banks to improve their  risk management processes. Continued monitoring of financial sector  exposures and enhancing the macroprudential tools would help stem  risks associated with the rapid rise in house prices and mortgage  lending. Limiting the use and generosity of the mortgage interest tax  credit would go a long way in further mitigating housing market  risks. 

"The government's structural reform agenda appropriately focuses on  fostering inclusive growth, including by improving the business  environment, raising productivity, reducing unemployment and poverty,  and addressing the risks associated with climate change. Achieving  these objectives requires developing stronger trade links, building  infrastructure to support connectivity; improving transportation,  land, and water management and encouraging green energy generation;  fostering access to financial services and labor force participation;  completing governance reforms, and reducing informality. Advancing  digitalization should spearhead public administration reforms and  improve public service quality and delivery.

"The IMF team thanks the Armenian authorities, private sector, and  development partners for fruitful discussions and cooperation."