WASINGTON, MARCH 10, NOYAN TAPAN. The Executive Board of the International Monetary Fund (IMF) has approved a 28-month SDR 368 million (about US$540 million) Stand-By Arrangement for Armenia to support the country's program to adjust to the deteriorated global outlook, restore confidence in the currency and financial system, and protect the poor. The approval makes the amount equivalent to SDR 161.5 million (about US$237 million) immediately available and the remainder in nine installments subject to quarterly reviews. According to a press release of the IMF, the Stand-By Arrangement entails exceptional access to IMF resources, amounting to about 400 percent of Armenia's quota. It was approved under the Fund's fast-track Emergency Financing Mechanism procedures. It is said in the press release that "the authorities' program is based on a consistent set of measures regarding exchange rate, monetary, financial, and fiscal policies, as well as continued structural reforms". "The authorities intend to cut back on non-priority spending while providing an increase in social spending of 0.3 percent of GDP, relative to the budget, to protect the poor through well-targeted social safety nets. Additional external financing will be used to boost public investment. Armenia's gross external financing requirements are projected at about US$1.6 billion for 2009, and will remain elevated through 2011, albeit with a slight downward trend. The Stand-By Arrangement will cover a large share of the country's 2009-2011 financing gap. Additional financing will be provided by Armenia's donors and international partners, including the World Bank," the press release reads. Mr. Murillo Portugal, IMF's Deputy Managing Director and Acting Chair, said: "With the adverse global developments, real growth is expected to contract in 2009, reflecting the downturn in Russia and other countries in the region. Falling international prices, lower growth, and exchange rate depreciation will help reduce the external current account deficit". "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. While 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. Maintaining the structural reform agenda will contribute to macroeconomic stability and a strengthened business environment. Key elements include the completion of the unfinished tax policy and tax administration reform agenda, and progress on financial sector reforms," M. Portugal said.

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