Armenia: IMF Executive Board Completes Second Review Under EFF/ECF Arrangement and Approves US$57.8 Million Disbursement

The Executive Board of the International Monetary Fund (IMF) has completed its second review of Armenia’s economic performance under a program supported by the Extended Fund Facility (EFF) and the Extended Credit Facility arrangement (ECF).¹

The decision enables the authorities to draw an additional SDR 36.2 million (about US$57.8 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 108.6 million (about US$173.5 million).

The three-year SDR 266.8 million (about US$426.2 million) EFF and ECF arrangement with Armenia was approved by the IMF’s Executive Board on June 28, 2010 (see Press Release No. 10/263).

Following the Executive Board's discussion on Armenia, Ms. Nemat Shafik, Deputy Managing Director, stated:

“The Armenian authorities are to be commended for the continued implementation of sound policies under the Fund-supported program. These policies have helped underpin a steady recovery from the global financial crisis. Growth is expected to accelerate and broaden in 2011, but Armenia faces a number of outstanding challenges, including a surge of inflation, sizeable external and fiscal imbalances, high financial dollarization, and, in the wake of the crisis, increased public debt and poverty.

“Fiscal policies have been prudent, with the budget deficit reduced significantly in 2010, and further consolidation underway in 2011 and planned for the medium term. The strengthened fiscal position will help ensure fiscal and debt sustainability and reduce vulnerabilities. Decisive implementation of tax policy and revenue administration reforms will ease the burden of adjustment on spending and provide space for additional, well-targeted capital and social outlays. These, in turn, will help reverse the crisis-related increase in poverty.

“Monetary policy will continue to aim at mitigating wider inflationary pressures. The authorities’ policy response to the pickup of inflation has been timely and effective, and efforts to more actively manage liquidity have increased the responsiveness of market rates to the policy rate, improving the traction of monetary policy. The Central Bank of Armenia stands ready to take additional actions should inflationary pressures persist. Private inflows have resumed and banking indicators, already strong, continue to improve. The Central Bank of Armenia continues its efforts to improve the resilience of the banking sector.

“Sound macroeconomic policies and structural reforms will help ensure a smooth and orderly external adjustment. Broad-based reforms aimed at enhancing the business environment and domestic competition will promote external competitiveness, productivity, and exports, and greater flexibility of the dram will provide appropriate price signals and reduce exposure to foreign exchange risk.”

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¹ The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years (http://www.imf.org/external/np/exr/facts/ecf.htm). The Fund reviews the level of interest rates for all concessional facilities every two years.