YEREVAN (RFE/RL)–The Armenian government and a delegation from the International Monetary Fund have agreed on policy measures needed for Yerevan to get the last crucial payment of a three-year IMF loan package–an IMF official said on Saturday. But the $30 million tranche of the IMF’s Enhanced Structural Adjustment Facility (ESAF) will be released no sooner than mid-September–according to George Anayiotos–the Fund’s resident representative to Armenia.
The money was expected to be released in June but was delayed due to the government’s worse-than-expected revenue collection which calls into question its budget targets for this year. The loan is designed to strengthen Armenia’s extremely unfavorable balance of paymen’s.
"The IMF mission has reached understandings with the government of Armenia on a set of policies that aim to strengthen Armenia’s economy by reversing deviations in the program implementation that emerged earlier this year," Anayiotos told reporters. He said the government of new Prime Minister Vazgen Sargsyan has pledged "swift action" to "bring the deficit under control and restore financial viability of the energy sector," still dependent on state subsidies.
He said those "understandings," backed up by a written police statement from Yerevan–will be submitted to the IMF management and then to its executive board for the "final approval" of the tranche. "If all goes well–the IMF board will be able to discuss Armenia’s request…some time in mid-September," Anayiotos said.
In his inaugural speech to parliament last month–Prime Minister Sargsyan said the authorities might this year collect 15 billion drams ($28 million) – which makes up about eight percent of the projected budget – less than they had anticipated. Some analysts give even higher figures.
The uncertainty surrounding the IMF tranche has led the World Bank to delay the next $15 million payment of its $55 million Structural Adjustment Credit (SAC)–which largely goes to cover Armenia’s budget deficit. Officials admit that they consider spending cuts in the budget approved by the previous Armenian parliament late last year. The measure would result in the reduction of already meager funds earmarked for social programs. The country’s population has been hit hard by recent years’ policy of economic reform which have plunged many Armenia’s into poverty.
The IMF’s Anayiotos said it is up to the Sargsyan government to decide how to get the budget into shape and curtail the "big deficit." In his words–the IMF mission "welcomed the government’s continued commitment to deepening structural reforms–strengthening the banking system and enhancing the financial monitoring of the remaining public enterprises."It is very important to implement these measures as soon as possible in light of this difficult situation," he said.
Compliance with the guidelines of Western lending institutions has required unpopular measures from successive Armenian cabinets. They have among other things pledged to phase out state subsidies to the energy sector. Sargsyan said last week he is under pressure to further increase electricity fees but will not cave in. It remains to be seen how the government will address IMF concerns.
Sargsyan along with Karen Demirchian–Armenia’s longtime Soviet-era leaders–are the co-heads of the Unity alliance that swept to a landslide victory in parliamentary elections last May. The bloc campaign on a populist platform that called for the state’s greater involvement in economic affairs. But the presence of several liberal economists in the current cabinet suggests that there will be few economic policy changes. Armenia has registered a single-digit annual economic growth since 1994 under a relatively low inflation. But economists believe that higher expansion rates are needed to boost low living standards. According to official estimates–the economic crisis in Russia will slow Armenia’s economic growth to four percent this year from last year’s 7 percent.