Next IMF Loan Still in Question As Cuts Loom

YEREVAN (RFE/RL)–Another round of talks between the International Monetary Fund and the Armenian government ended last week with little progress on the release of the IMF’s $32 million tranche–an informed government source said on Thursday.

The payment is crucial for the government of Prime Minister Vazgen Sargsyan as its projected budget for this year comes under strain due to a worse-than-expected revenue collection. The IMF was originally expected to disburse the last payment of its three-year loan program worth $154 million by the end of June but still withholds the money demanding urgent fiscal measures. This has led the World Bank to delay the payment of its scheduled $25 million tranche aimed at funding Armenia’s budget deficit.

The source told RFE/RL that an IMF delegation gave Yerevan until late August to bridge its growing budget gap. That should inevitably involve either improved tax collection or cuts in the planned government spending. The latter option appears to be more likely–with some senior government officials having already described this year’s spending and revenue targets as unrealistic.

Prime Minister Sargsyan said earlier that some 15.5 billion drams ($29 million) in projected state revenues may not be collected and admitted that a budget sequestration is possible. Some analysts estimate that the figure could rise to as many as 38 billion drams. Any cuts in the already small budget could deal a heavy blow to the new cabinet’s popularity. Sargsyan said over the weekend that he is opposed to the IMF’s and World Bank’s deman’s of further hikes in utility prices. Many Armenia’s already cannot afford the existing electricity fees.

The IMF also wants Yerevan to act more forcefully in grappling with accumulated mutual debts between various sectors of the economy–government and consumers–the source said. In one such example–the Armenian energy sector is reportedly owed a total of 60 million drams by consumers and is unable to pay its own debts to fuel suppliers.

The IMF loans–which are intended to strengthen a country’s balance of paymen’s–have been crucial for a relative macroeconomic stability enjoyed by Armenia’since 1995.


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