Via IMF (Den Internationale Valutafond)

IMF Reaches Staff-Level Agreement on Third Review for Armenia’s Stand-By Arrangement

November 18, 2020

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

  • An IMF team reached staff level agreement with the Armenian authorities for the completion of the third review under the program supported by an IMF Stand-By arrangement. Pending approval of the IMF’s Executive Board, SDR 25.714 million (around US$36.7 million) will become available for budget support after the Board meeting.
  • The COVID-19 pandemic and the recent military hostilities weigh on its near-term economic outlook. This IMF financing will help the authorities meet urgent medical and socio-economic needs and support the implementation of reforms for stronger and more inclusive growth.

Washington, DC:
An International Monetary Fund (IMF) team led by Nathan Porter conducted
discussions on the third review of Armenia’s reform program supported by
the IMF Stand-By Arrangement (SBA). Discussions were held during September
2-November 16, 2020. At the conclusion of the discussions, Mr. Porter
issued the following statement:

“We are pleased to announce that the IMF team has reached a staff-level
agreement with the Armenian authorities on the conclusion of the third
review under their economic reform program, which is supported by a
three-year SBA. The agreement is subject to approval by the IMF’s Executive
Board, which is scheduled to consider this review in mid-December. About
US$ 36.7 million (SDR 25.714 million) would become available to be
disbursed immediately after the Board meeting. This financing will be
allocated to the budget to help the authorities’ efforts in meeting the
urgent medical and socio-economic needs.

“Armenia’s economy has been hard hit by the COVID-19 pandemic and the worst
military confrontation since the early-1990s and is set to contract in
2020. These shocks have created domestic demand and supply disruptions and
have been exacerbated by a sharp decline in export and tourism revenues,
remittances, and to some extent, weaker capital flows. Real GDP is now
expected to decline by over 7 percent in 2020. While uncertainty about the
recovery is high, growth is projected to remain modest in 2021 and then
pick-up as the economy gradually adapts to, and moves past, the impact of
these shocks and associated economic scarring. Over the medium term,
inflation should rise and gradually converge to its target from below.
Near-term downside risks associated with external developments, an
uncertain economic and political environment, elevated regional tensions,
and the intensity and duration of the pandemic, are balanced against
potential upsides from a faster recovery from the pandemic, more limited
scarring, and faster reform implementation.

“Key near-term priorities include supporting the most vulnerable while
ensuring the adequate public health response to the second COVID-19 wave.
As the recovery gains momentum, it will be essential to unwind the
remaining temporary support measures.

“Lower revenues and higher spending on healthcare, socio-economic support,
and security will significantly raise the fiscal deficit and public debt in
2020. The fiscal deficit in 2020 is expected to widen to AMD430 billion (7
percent of GDP) before narrowing to AMD355 billion (5½ percent of GDP) next
year. The budget will be financed by mobilizing resources from domestic and
external sources, including development partners. Government debt is
expected to exceed 60 percent of GDP in 2020 and rise to around 69 percent
in 2021. Staff welcomes the authorities’ strong commitment to fiscal
sustainability, guided by their fiscal rule, despite the pressures they are
facing. To this end, the authorities will intensify revenue mobilization
efforts, undertaking tax policy and administration measures, while
containing current spending and safeguarding priority spending. As a
result, central government debt is expected to gradually decline over the
medium term and fall below 60 percent of GDP by 2026.

“The current accommodative monetary policy stance is appropriate and helps
ensure adequate liquidity in the banking system and support domestic
credit. The Central Bank of Armenia (CBA) should monitor developments
carefully and stand ready to adjust the monetary stance as necessary, while
allowing the exchange rate to be a shock absorber. The financial system
shows no signs of stress, but the full impact of the twin shocks is not yet
evident. The CBA’s regulatory and supervisory response to the shocks has
been appropriately balancing the goals of preserving financial stability,
maintaining banking system soundness, and sustaining economic activity. The
CBA should continue identifying vulnerabilities and take any necessary

“Despite delays partly inflicted by the twin shocks this year, the
authorities have continued making progress on their economic reform agenda
and are committed to staying the course. Reform priorities, among others,
include making the public investment process more robust and efficient,
strengthening the management of fiscal risks, enhancing fiscal governance
and transparency, improving efficiency and fairness of the tax system to
foster compliance and boost revenue collection, and strengthening the
education sector and anti-corruption efforts.”

IMF Communications Department


Phone: +1 202 623-7100Email:


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