World Bank Pledges $85 Million in New Loans

YEREVAN (RFE/RL)–Armenia will receive some $85 million in fresh loans this year if it carries on with economic reform–a senior World Bank official said on Monday. The Bank’s resident representative in Armenia–Owaiss Saadat–said $45 million of the sum will go to cover about half of the government’s projected budget deficit. The rest of the money is planned to be spent on a variety of projects encompassing the infrastructure–social and judicial sectors–he said.

"In total–one should see from the World Bank about $40 million for investmen’s in the year 2000–and $45 million for the budget," Saadat said. The Armenian government’s draft budget for this year–which has yet to be debated by parliament–envisages reducing the deficit to 4.3 percent of the country’s GDP. The bulk of the gap is to be financed from external sources–notably the World Bank. The draft’s roughly $500 million volume and spending proportions are only slightly different from 1999.

Saadat told reporters in Yerevan that the timetable for the release of the new funds will be worked out by Bank executives and Armenian officials "over the next few months." He said the loans are conditional on the cabinet of Prime Minister Aram Sargsyan pressing on economic liberalization and deregulation. In his words: "The flow of World Bank resources will depend on the progress which is made both in meeting preparatory steps for the projects and meeting the adjustment and policy reforms for the $45 million [in deficit funds]."

The Sargsyan government has experienced serious problems with meeting its spending targets for last year following a delay with the release of a $25 million loan tranche from the World Bank. The delay was largely attributed to the government’s weaker revenue collection following the October 27 assassinations in the Armenian parliament. Saadat said the money–reduced to $20 million–has already been made available as Yerevan fulfilled most of its commitmen’s.

"The government has made a strong and laudable effort–which we recognize," he said–while noting that the Armenian authorities have yet to remove all "legal–regulatory and administrative obstacles in the way of investment." He also urged the authorities to simplify enterprise bankruptcy procedures and "accelerate" the long-running privatization process.

According to official statistics–the Armenian economy expanded by 4 percent last year–with the annual inflation remaining below 2 percent. The government expects faster growth this year.

The World Bank official argued that the country–impoverished following the break-up of the Soviet Union–needs to do more to attract vital foreign investmen’s–and that the successful handling of the privatization of its electricity distributing companies would foster a greater influx of capital. "Armenia is performing really below its potential in foreign investment," he said.


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