YEREVAN (RFE/RL)–The Armenian authorities shed more light Thursday on how they plan to spend a $500 million anti-crisis loan that will be provided to them by the government of Russia.
An agreement on the release of the loan, repayable in 15 years, was signed by the Armenian and Russian foreign ministers in Moscow on Wednesday. They confirmed that it is meant to alleviate the growing impact of the global economic meltdown on Armenia.
Economy Minister Nerses Yeritsian told RFE/RL that the bulk of the sum will be used to finance “development programs” envisaged by the Armenian state budget for this year. He gave no details of those programs.
The Russian loan is equivalent to approximately one fifth of total expenditures projected by the budget. The Armenian government has been struggling to meet the spending target because of a major shortfall in tax revenues resulting from the economic recession.
Addressing a weekly session of his cabinet earlier on Thursday, Prime Minister Tigran Sarkisian said $30 million of the loan will be re-lent to Armenian small and medium-sized enterprises (SMEs) through local commercial banks. The government already obtained a $50 million loan from the World Bank for that purpose earlier this year.
“Additional funs will be allocated to mortgage lending,” said Sarkisian. He referred to a special fund that was set up by the Central Bank of Armenia (CBA) to make housing loans more accessible and cheaper to the population. The CBA contributed 5 billion drams ($13.4 million) to the fund in April and expects its authorized capital to total 30 billion drams by the end of this year.
The authorities hope that the mortgage scheme will also give a boost to Armenia’s construction sector. It has been hit particularly hard by the economic crisis, contracting by 42.4 percent in the first four months of 2009. The slump was in turn primarily responsible for a 9.7 percent decline in Armenia’s Gross Domestic Product registered during that period.
“The 42 percent reduction is normal in the sense that the situation is similar all over the world,” said Yeritsian. “Demand and prices for real estate have gone down everywhere.”
The minister added that the government has approved unprecedented tax rebates for the country’s leading construction firms in addition to 20 billion drams in credit guarantees that it offered them in April. “Government efforts to stop [the decline] are evident, and I want to stress that time is needed for that to affect the economy,” he said. “I hope that we will see an opposite trend in the second half of the year.”