THE IMF LOOKS FAVORABLY ON BAKU; LESS SO ON YEREVAN.

An IMF mission to Azerbaijan announced on May 2 that the Fund will extend a new $230 million credit in support of the country’s economic reform program for 1997-1998. This would be in addition to the $400 million in IMF assistance already provided to Azerbaijan, $300 million of which was disbursed in 1996. (Interfax, May 3; Turan, April 23) Combined with the nearly $1 billion in direct foreign investment that Azerbaijan received last year, these funds should help Baku make debt-servicing payments of $120 million this year, $80 million next year, $90 million in 1999, and $96 million in 2000. (Azerbaijan’s annual debt-servicing payments are then scheduled to fall sharply, from $23 million during 2001-2005, to $17 million during 2006-2015, and $9 million during 2016-2030.)

By contrast, Armenia’s relations with the Fund continue to be rocky. While $50 million of the country’s three-year $150 million Extended Structural Adjustment Facility was disbursed to Armenia in 1996, the $25 million tranche that was to have been released in February was withheld due to IMF concerns about the adequacy of tax collection efforts, as well as the rapid growth of Armenia’s public debt. And although discussion of these matters between Prime Minister Robert Kocharian’s government and an IMF mission began on May 1 and are set to continue, press reports have seemed to focus on the Fund’s concerns about Armenia’s apparent lack of progress in these areas since the last mission visit in February.

Indeed, Azerbaijan and Georgia are clearly in the IMF’s good graces, but Armenia is receiving much less favorable treatment. Although the IMF’s concerns about Armenian fiscal and monetary policies may be justified, similar criticisms could be leveled at the macroeconomic policies pursued in Tbilisi and Baku. That is, all three countries are enjoying strong economic growth, stable currencies, and low inflation rates, but the three also have been experiencing difficulties in collecting taxes and continue to rely heavily on external funding to finance their current-account deficits. What differentiates them? The increasingly Western orientation apparent in Georgian and Azerbaijani foreign policy, which contrasts with the closer security ties that Armenia is now seeking with Russia, may help explain why the IMF seems to be applying different economic standards in the Caucasus.

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