ARE YEREVAN’S RELATIONS WITH THE IMF BACK ON TRACK?

Armenia is unlikely to receive the next $25 million tranche of its $150 million Extended Structural Adjustment Facility before mid-June. (Noyan Tapan, March 3, 7) This conclusion emerged at the end of a week-long IMF mission to Yerevan, during which time Fund Representative Thanos Catsambas emphasized the IMF’s concerns over Armenia’s economic policies. The Armenian National Bank’s failure to implement a previously agreed-upon program to merge and restructure commercial banks, as well as the "unreal" nature of the government’s "optimistic" budgetary revenue projections, were sources of special IMF concern. Although preliminary agreements appeared to have been reached on these matters in early March, Catsambas declared that the mission will return in May to monitor the government’s compliance with the agreements.

These developments underscore Armenia’s continued reliance upon the IMF to fund its economic recovery. While a 5 percent increase in GDP recorded in 1996 puts Armenia among the fastest growing CIS economies (along with Georgia and Kyrgyzstan), its meager capital inflows mean that, without IMF lending, Armenia would be unable to finance its budget deficit (projected at 4.5 percent of GDP in 1997) in a non-inflationary manner. These developments also reflect a growing IMF frustration with economic policy in Armenia. In contrast to Russia, Ukraine, and Kazakstan, Yerevan is unable to count on obtaining significant loans from private investors.

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