European Bank to Issue $5 Million Loan to Armenian Construction Firm

YEREVAN (Combined Sources)–The European Bank for Reconstruction and Development (EBRD) will issue a $5.5 million credit and a $184,000 grant to the Elite Group CJSC, an Armenian construction company, the Bank’s representative in Yerevan said on Wednesday.

An agreement was signed Wednesday by the head of the EBRD office in Yerevan Valery Razlog and the Director of Elite Group CJSC, Armen Mkoyan.

“One of the advantages of our cooperation with the EBRD is higher-quality company management, which is of the company’s competitive advantages on the market,” he said. The agreement is the EBRD’s second large-scale loan to Armenia over the last month, according to Paul-Henri Forestier, EBRD Director for the Caucasus, Moldova and Belarus.

Mkoyan said the loan is very important for Armenia’s entire construction sector, hit hard by the global economic crisis. Armenia’s economy has seen a sharp decline in construction this year, which has dragged Armenia deeper into recession and caused its first-quarter Gross Domestic Product to shrink by 6.1 percent, according to official statistics released in April.

In an effort to boost the sector, the Armenian government approved in April 20 billion drams ($54 million) in loan guarantees for local construction firms lacking funds to complete their projects. The authorities also hope to stimulate the local housing market with a new mortgage lending fund set up by the Armenian Central Bank this month. The Bank has contributed 5 billion drams to the fund and says external loans and funding will raise its authorized capital to 30 billion drams by the end of the year.

Earlier last month, the EBRD and Russia’s Vnesheconombank signed an intercreditor agreement, wherein the two banks will provide a total of $92 million in loans to Armenia’s electricity distribution company to promote energy efficiency throughout the country.

Forestier said he hopes the agreements will start a tradition of support to the Armenian economy by the EBRD, adding that the most recent loan will “assists not only the Elite Group, but also the entire Armenian economy.”

Elite Group, a company dedicated to the construction, interior design and service of high-status residential and public complexes, was similarly granted a loan to encourage research and innovation in energy efficient construction.

According to Armenian Prime Minister Tigran Sargsyan, Elite Group is one of the premier developers in the country.

Sargsyan said the government has provided the company with state guarantees for completing construction on stalled projects. He added that he hopes the loans will give the government and international financial structures an increased measure of confidence, bolstering private sector investment into Armenia’s construction sphere.

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