IMF Team to Visit Armenia On February 1

YEREVAN (Noyan Tapan)–The delegation of the IMF will visit Yerevan on February 1-14–2002 to conclude discussions on the completion of the first and second reviews under the PRGF arrangement–said Garbis Iradian–IMF Resident Representative in Armenia.

After the discussions are concluded–the results will be subject to further review and approval by the IMF management. IMF approval depends on the Armenian governmen’s efforts to implement certain measures – particularly in the fiscal area–will lead to submission of the program to the IMF’s Executive Board in April of 2002. Thomas Wolf–head of the IMF team to Armenia–will not accompany the mission this time because of a broke ankle. However–Wolf will lead the negotiations from Washington–using the video-conferencing facility at the World Bank office in Yerevan.

Iradian noted that overall the macroeconomic situation is considered satisfactory taking into account the strong real economic growth (9.6 percent in 2001)–continued low inflation (about 3 percent)–and substantial decline in external current account deficit as a result of continued strong growth in exports of goods and services. While the IMF welcomes the modest improvement in tax collection during the fourth quarter of 2001–Iradian urged the authorities work harder. Armenia cannot go on forever relying heavily on budgetary financing from external sources. Although tax revenues in 2001 increased by about 11 percent as compared to 2000–they have declined in terms of GDP.

Iradian also shared the views of the chief economic advisor to the president–that the polarization of the Armenian society is deepening–as the fruits of the strong economic growth in recent years are not distributed fairly. The GINI index–which measures the extent of inequality in a country–is higher in Armenia than in any other transition countries. One of the main reasons for the unequal distribution of income is rampant corruption. Tax evasion is one form of corruption and the low tax collection rate–14.3 percent of GDP in 2001–limits the governmen’s resources enabling them to increase social expenditure.

Improved public governance is the key–to sustain the strong economic growth registered in 2001 and to reduce poverty in Armenia–noted Iradian. The country’s real GDP of 2001 is close to three-fourths of the level of the beginning of the 1990s. Despite an average six percent annual economic growth over the past eight years–poverty remains high and emigration continues to be a major drain on the economy. To solve these problems–policies must be in place in Armenia to ensure that the growth rates of recent years can continue to be achieved and–if possible–exceeded.

Iradian emphasized that improved governance and reduced corruption are not only essential to encourage more investment and growth–but they will result in more equal income distribution and reduce poverty.

Areas in which governance needs to be improved include: (1) achieving a level of tax revenues adequate to fund the core responsibilities of government; (2) implementing a series of reforms aimed at discouraging corruption among public officials; (3) a range of specific measures aimed at improving the business environment–including judicial reforms; and (4) better management of the state’s assets–including their privatization when this is the major route towards attaining significant gains in efficiency (e.g.–the electricity distribution companies).

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