Armenia to Finance Road Project Frozen By US

YEREVAN (RFE/RL)–The Armenian government has allocated almost $17 million to finance a massive reconstruction of Armenia’s battered rural roads following what appears to be a politically motivated delay in US funding which was signaled by Washington last month.

The promised funding is part of $235.6 million in additional economic assistance, which the United States pledged to provide to Armenia in 2006 under its Millennium Challenge Account (MCA) program. Most of the sum was to be spent on rebuilding and expanding the country’s 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 Millennium Challenge Corporation (MCC), a US government agency managing the global scheme, threatened last spring to freeze the assistance because of Armenia’s post-election political unrest. Although MCA assistance to Yerevan has continued since then, the corporation has pointedly delayed the disbursement of the first major installment of the five-year aid package earmarked for road construction. The portion worth $7.5 million was due to be released in May.

MCC’s governing board reiterated after its last meeting on June 17 US concerns about the mass arrests of Armenian opposition supporters and serious restrictions on freedom of assembly placed by the government. In a statement, the board also stressed the need for an "independent inquiry into the conduct of the [February 19 presidential] election and post-election events."

"MCC’s Board agreed that recent developmen’s in Armenia intended to address these concerns were encouraging and will continue to monitor the situation in Armenia," added the statement.

The board’s next meeting is scheduled for September, meaning that MCA funding for the road project will not be made available at least until then.

Citing the delay, the Armenian government decided late last week to allocate $16.8 million for the start of the project’s implementation. Prime Minister Tigran Sargsyan told ministers that the money will lead to the first "large-scale work" on roads connecting Armenian villages and small towns. "We must organize the work as quickly as possible so that we don’t miss this year’s [construction] season," he said, instructing Economy Minister Nerses Yeritsian to inform MCC about the decision.

The issue is bound to be on the agenda of Foreign Minister Eduard Nalbandian’s first visit to Washington, which began on Monday. Nalbandian is scheduled to meet with senior MCC executives during the four-day trip.

The Armenian government’s extraordinary allocation to the US-funded infrastructure project was made possible by its better-than-expected tax collection in the first half of this year. The government raised its projected budgetary expenditures for 2008 by 13.5 billion drams ($44.4 million). Armenia’s much-maligned customs service generated the bulk of the gain.

The promised US assistance is essential for the success of the government’s efforts to reduce rural poverty and narrow a growing income gap between Yerevan and the rest of the country. Armenian and US officials have said in the past the infrastructure projects covered by MCA would benefit 75 percent of the country’s million-strong rural population.

However, Transport and Communications Minister Grigor Sargsian cautioned last month that the scale of those projects has been dramatically reduced by the appreciation of the Armenian national currency and increased prices of construction materials in recent years. "The 937 kilometers [of roadwork] envisaged by the Millennium Challenge Account has shrunk to about 330 kilometers," he said.


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