IMF approves new three-year SBA (Stand-By Arrangement) with Armenia  amounting to $175 million

ArmInfo. The Executive Board of the International Monetary Fund (IMF) approved a new three-year SBA (Stand-By Arrangement) with Armenia amounting to SDR 128.8 million, or approximately $175 million (100% of Armenia's IMF quota). The IMF also completed the previous, sixth review of the SBA,  set to expire on December 11, 2025, as noted in a statement issueed by the IMF.

Upon the Board's approval of the new SBA, an amount equivalent to SDR  18.4 million (about US$25 million) becomes immediately available to  Armenia. The remaining amount will be made available in equal  tranches, subject to six semi-annual reviews. The Armenian  authorities have indicated that they intend to treat the arrangement  as precautionary

The new SBA, considered by the Armenian authorities as precautionary,  aims to support the authorities efforts to maintain macroeconomic  stability and advance their structural reform agenda and provide  insurace in an uncertain environment.

The IMF notes that Armenia's economic performance has remained strong  despite a series of shocks amid an uncertain global environment.  "Thanks to the authorities' agile policies and unforeseen inflows of  labor and capital, real GDP grew on average by 8.9 percent annually  in the past three years, and is expected to remain strong reaching  about 5 and 5.5 percent in 2025 and 2026, respectively.  The economic  outlook remains positive, with steady growth and inflation converging  to the CBA's target.  Continued implementation of prudent policies  and acceleration of reforms will be critical to further strengthen  resilience and secure inclusive and sustainable growth in the period  ahead.

The authorities' 2026 budget and medium-term fiscal consolidation  planned in the authorities' MTEF are appropriate. The planned fiscal  stance in 2026 is mildly contractionary, while accommodating spending  on refugee support, health, and public investment. Over the medium  term, further deficit reduction while creating fiscal space for  priority social and capital spending will be underpinned by  additional revenue mobilization through broadening the tax base as  well as revenue administration measures, and fiscal structural  reforms to raise spending efficiency.  The CBA's new monetary policy  framework, centered on a prudent risk management approach and a high  degree of transparency, supports its inflation target of 3 percent.  The flexible exchange rate continues as a key shock absorber, which,  together with healthy reserve buffers, will continue to serve the  economy well in the event of external shocks."

The IMF notes that the banking system is well capitalized and liquid,  and mortgage growth has receded somewhat. "The CBA's monitoring and  readiness to deploy its macroprudential tools will help mitigate  risks arising from continued strong credit growth. Development of  further macroprudential tools and further strengthening of the CBA's  prudential and supervisory framework and toolkit will further  buttress financial system resilience."

Additionally, the IMF emphasizes that  structural reforms should be  accelerated to raise labor force participation and employment, and  support export diversification. Improvements in the investment  climate through better governance and strengthening of the legal  framework for businesses will support these reforms. Further steps to  improve the quality of statistical reporting will help support  decision making.

IMF Deputy Managing Director Bo Li stated: Mr. Li, Deputy Managing  Director and Acting Chair, made the following statement:  "Armenia  has successfully navigated multiple challenges in recent years, while  preserving macroeconomic and financial stability. The economic  outlook remains positive, amid increased growth potential and  inflation converging to target. Performance under the current  Stand-By Arrangement (SBA) has been strong. Continued policy prudence  and acceleration of reforms-supported by a successor SBA, which the  authorities intend to treat as precautionary-will be important to  further strengthen resilience and secure inclusive and sustainable  growth."

He believes  that the policy focus of the 2026 budget on fiscal  consolidation while preserving space for policy priorities including  refugee support, health, and public investment is appropriate. In the  medium term, revenue mobilization and progress on structural fiscal  reforms to enhance the effectiveness of public investment will create  space for priority spending while reducing the fiscal deficit  further, thereby ensuring that public debt remains moderate.

"The Central Bank of Armenia's (CBA) new monetary policy framework,  centered on prudent risk management and combined with a high degree  of transparency, supports the CBA's inflation target of 3 percent.  The CBA should continue to calibrate policy rate actions to keep  inflation close to target and inflation expectations well anchored.  The flexible exchange rate has served Armenia well in absorbing  external shocks, while building reserve buffers. With continued  strong credit growth, driven by loans to the construction industry  and consumers, the CBA will need to stand ready to deploy its  macroprudential tools to mitigate risks to financial stability.  Further enhancing the macroprudential toolkit and strengthening the  supervisory framework are also key." Mr. Li stated

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 "Advancing structural reforms and strengthening governance will  support sustainable and inclusive growth. The authorities' efforts to  increase labor market participation and reduce structural  unemployment, diversify exports, and strengthen transparency and  competitiveness will enhance economic resilience and boost Armenia's  economic growth potential. Improving the quality of statistical  reporting will be important to support decision making," he  concluded.

According to the updated IMF forecast, Armenia's export and import  indicators will decrease by 31.1% and 28.1%, respectively, in 2025,  with a return to almost equal growth in 2026 - 2.2-2.1% and a further  moderate acceleration of growth rates in 2027 to 3.4-3.7%. The  current account deficit to GDP ratio will remain at 4.5% in  2025-2026, with a further decline to 4.4% in 2027. The GDP deflator  index will increase by 2.7% in 2025 (compared to 1.4% growth in  2024), and then grow by 3% in 2026-2027. The share of investment in  GDP will increase slightly in 2025 to 24.7% (from 23.8% in 2024), but  will then roll back in 2026-2027 to 23.5-23.1%. The unemployment rate  in the country, according to the IMF forecast, will be 13.7% in 2025  (compared to 13.9% in 2024), and will then decrease slightly annually  - to 13.6% in 2026 and to 13.5% in 2027.