IMF completes 3rd review under stand-by arrangement for Armenia, approves $73.6 million disbursement

March 30, 2010 - 12:11 AMT

PanARMENIAN.Net - The Executive Board of the International Monetary Fund (IMF) completed the third review of Armenia's economic performance under a program supported by a Stand-By Arrangement (SBA). The decision enables the immediate release of an amount equivalent to SDR 48.485 million (about US$73.6 million), bringing total disbursements so far an amount equivalent to SDR 350.425 million (about US$532.2 million), the IMF said in a press release.

The Executive Board also approved a request for a waiver of nonobservance of the end-December 2009 quantitative performance criterion on the net domestic assets of the Central Bank of Armenia (CBA).

The 28-month SBA was approved for an amount equivalent to a total of SDR 368.0 million (about US$558.9 million) on March 6, 2009, with a total amount of access augmented to an amount equivalent to SDR 533.6 million (about US$810.4 million) on June 22, 2009.

Following the Executive Board's discussion on Armenia, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated: "Armenia's performance under its Stand-By Arrangement with the Fund has been strong, and the economic recession appears to have bottomed out, aided by supportive monetary and fiscal policies. The challenge remains to support the fragile recovery, address external vulnerabilities, and advance a credible fiscal consolidation plan over the medium term."

"Fiscal policy aims to continue to support the recovery, while gradually starting fiscal consolidation in 2010. Social spending will be protected. The authorities are committed to make good progress on the reforms in tax policy and administration, as well as on public expenditure and debt management.

"Monetary policy aims to move from an accommodative to a more neutral stance, in order to head off potential inflation pressures. The authorities are committed to a flexible exchange rate regime, and aim to strengthen the monetary transmission mechanism to enhance the effectiveness of monetary instruments, as well as improve the central bank's communication strategy.

"The financial sector remains sound and well capitalized, and the authorities have strengthened their crisis preparedness and contingency planning frameworks. Further reforms will be important to ensure continued resilience to risks.

"The authorities are committed to pursue broad-based structural reforms to enhance productive capacity and promote long-term growth through an open trade regime, an improved business environment, better governance, and increased market competition in key sectors of the economy," Mr. Portugal said.

The International Monetary Fund (IMF)

The International Monetary Fund (IMF) is an international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments. It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development.[3] It also offers highly leveraged loans, mainly to poorer countries. Its headquarters are inWashington, D.C., United States.

The IMF's influence in the global economy steadily increased as it accumulated more members. The number of IMF member countries has more than quadrupled from the 44 states involved in its establishment, reflecting in particular the attainment of political independence by many developing countries and more recently the collapse of the Soviet bloc. The expansion of the IMF's membership, together with the changes in the world economy, have required the IMF to adapt in a variety of ways to continue serving its purposes effectively.

In 2008, faced with a shortfall in revenue, the International Monetary Fund's executive board agreed to sell part of the IMF's gold reserves. On April 27, 2008, IMF Managing Director Dominique Strauss-Kahn welcomed the board's decision of April 7, 2008 to propose a new framework for the fund, designed to close a projected $400 million budget deficit over the next few years. The budget proposal includes sharp spending cuts of $100 million until 2011 that will include up to 380 staff dismissals.

At the 2009 G-20 London summit, it was decided that the IMF would require additional financial resources to meet prospective needs of its member countries during the ongoing global financial crisis. As part of that decision, the G-20 leaders pledged to increase the IMF's supplemental cash tenfold to $500 billion, and to allocate to member countries another $250 billion via Special Drawing Rights.