Stronger Dram to Dampen Impact of US Aid to Armenia

YEREVAN (RFE/RL)–The appreciation of the Armenian national currency, coupled with increased prices of construction materials, has dramatically reduced the scale of infrastructure projects in Armenia financed by the US government and other Western donors, Transport Minister Gurgen Sargsian said on Tuesday.
Sargsian singled out nationwide roadwork, which the Armenian government plans to carry out with financial assistance from external sources and the U.S. Millennium Challenge Corporation (MCC) in particular.
The United States approved in early 2006 $235.6 million in additional economic assistance to Armenia under its Millennium Challenge Account (MCA) program managed by the MCC. Most of the promised aid is to be spent on rebuilding and expanding the country’s battered irrigation networks. Another $67 million was set aside for capital repairs of about 1,000 kilometers of rural roads that have fallen into disrepair since the Soviet collapse.
"The 937 kilometers [of roadwork] envisaged by the Millennium Challenge Account has shrunk to about 330 kilometers," said Sargsian. "That is, we can’t repair those 937 kilometers with the same sum anymore. We can only do only one third of the planned work."
The Armenian dram has gained more than one third in nominal value against the US dollar since the infrastructure projects were approved by the two governmen’s in late 2005. The past three years have also seen a surge in the cost of construction materials fuelled by Armenia’s ongoing construction boom.
The MCC has yet to disburse the bulk of the promised assistance to Armenia which is conditional on the implementation of political and economic reforms by its government. The executive director of the corporation, John Danilovich, and other US officials have warned that the aid package could be suspended or terminated altogether unless the Yerevan government ends its crackdown on the opposition and restores civil liberties restricted following last February’s disputed presidential election.

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