Armenia to take out OPEC loan to cover budget deficit

ArmInfo. To cover the state budget deficit, Armenia will take out a EUR 50mln loan. At its  meeting on November 17, Armenia's Cabinet approved the bill on ratification of the loan agreement "Green, sustainable and inclusive development programme" between Armenia and OPEC.  

The loan agreement for the amount of 50 million euros was signed on  October 3 and 23, 2023. The project aims to promote green,  sustainable and inclusive development in Armenia by promoting climate  change mitigation and adaptation, improving environmental management  and energy efficiency, achieving greater levels of equality and  promoting human capital development, as well as strengthening  governance.

Budget support funds will be used to finance the deficit defined by  the RA Law ,  therefore, as noted, the timely receipt of loan funds is of great  importance in terms of financing expenses provided for by the  categories of the state budget.

Implementation of measures and reforms in a number of areas  identified by a bilaterally agreed table of policy actions is a  prerequisite for receiving budget support funds. The program is being  implemented jointly with the World Bank, so the scale of reforms is  identical to the table of policies of the loan agreement signed with  the World Bank on April 4 of this year.

The scope of the program reforms includes, in particular, the  following measures, which, in turn, also consist of sub-measures:

Promoting climate change mitigation and adaptation, as well as  improving the regulatory framework for environmental management; a)  management of public investments b) promotion of energy efficiency c)  conservation of atmospheric air d) environmental impact assessment.

Strengthening equality and promoting human capital development; a)  increasing the targeting of the social support system b) introducing  a new curriculum based on competencies aimed at achieving learning  outcomes.

Improving the effectiveness of the anti-corruption system and the  justice sector; (a) evaluation of state aid (b) justice and  anti-corruption.

Since 2017, the financial authorities of Armenia have declared their  readiness, starting in 2019, and then starting in 2021, to abandon  external financial assistance in the form of budget loans and move to  targeted lending to strengthen the foundations of the economy. As the  then Minister of Finance Atom Dzhandzhugazyan assured during  discussions of the draft state budget of the Republic of Armenia for  2020, the stage of financing the budget deficit from external  resources in our country can be considered completed. As the chief  financier of Armenia explained, today many consider this instrument  quite attractive, since a budget support loan differs from other  types of borrowing in that it does not have a program for specific  targeted spending and is provided on preferential terms. However,  these types of preferential loans are dangerous because the country  may become completely dependent on external borrowings, the minister  noted.