IMF welcomes Armenian authorities’ policy

YEREVAN, March 9. /ARKA/. Murillo Portugal, Deputy Managing Director and Acting Chair, speaking Monday at a press conference where he commented International Monetary Fund’s approval of $540 million credit for Armenia, welcomed the policy the country’s authorities pursue.

“Sound policies are essential to maintain macroeconomic stability. The recent return to a flexible exchange rate will help cushion the impact of the global downturn and eventual further regional deterioration. An appropriately tight monetary policy is necessary to contain the inflationary pressures stemming from the depreciation and support demand for dram-denominated assets”, he said.

Portugal said that since the approval of a low-access PRGF arrangement in November 2008, Armenia has been confronted by a variety of major external shocks.

“Reflecting the sharp deterioration in global economic conditions, private transfers and capital inflows slowed considerably and international commodity prices have dropped severely, affecting mining exports and production”.

Portugal said that in light of a rapid decline in international reserves and growing financing needs, the authorities have requested additional financial assistance from the Fund.

“Falling international prices, lower growth, and exchange rate depreciation will help reduce the external current account deficit. Medium-term prospects remain good”.

Along with that, Portugal said that Armenia is still vulnerable before possible regional economic decline and political tension.

He said that reasonable policy will help maintain macroeconomic stability and mitigate impacts of the global crisis.

“While a potential negative impact of the depreciation on the financial sector seems unlikely, contingency plans are available to help address any such effects. In light of the expected revenue shortfall, fiscal policy will remain prudent, protecting social outlays and public investment by reducing non-priority spending”, Murillo Portugal said.

IMF has approved 28-month Stand-By Arrangement for Armenia amounted to SDR 368 million ($540 million).

The IMF lends this money to support programs aimed at adapting the country to deteriorating global prospect and restoration of public confidence in monetary and financial system and protection of the poor.

SDR 161.5 million (about $237 million) of this money will be transferred immediately and the remaining amount will be sent in nine tranches, after considering quarterly reviews.

The arrangement gives opens access to IMF funds that makes 400% of Armenia’s share.

The loan is extended under 1.54% annual interests for a five-year term.-0---