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EBRD issues new Armenia strategy for 2006-7
A new two-year EBRD
strategy for Armenia assesses macroeconomic performance as favourable,
notes the country’s commitment to the principles of political pluralism and
market economics and confirms the Bank’s intention to broaden the scope of its
activities in Armenia.
The EBRD strategy cites real economic growth averaging 12.4 per cent a year in
the past three years, higher consumer spending, tight monetary policy,
improved fiscal performance, a narrowing of the current account deficit,
better management of external debt, and rapid progress in structural reform.
It notes that poverty reduction remains a priority and that overall poverty
ratios are falling due to government programmes. It notes progress in reforms
to democratise the electoral code, strengthen checks and balances in the
political system and improve public governance. It adds, however, that the
political will to implement these commitments remains uncertain and further
steps are needed to fight corruption. Armenia’s partial isolation in the
region impedes economic development and the country’s inclusion in regional
projects and initiatives.
The strategy identifies six ways for Armenia to continue its progress towards
a market system. One is to improve the business environment by reducing
corruption and arbitrariness and emphasising the rule of law. Another is to
continue strengthening the relatively underdeveloped financial sector. With
privatisation nearly complete, accelerating post-privatisation restructuring
and improving corporate governance in the enterprise sector becomes a
priority, as does promoting the commercialisation of public infrastructure and
utilities, establishing competition in the market, and improving tax and
customs administration.
The Bank’s activities in Armenia will focus on developing the local private
sector and strengthening the financial sector. The strategy reflects the
EBRD’s Early Transition Countries Initiative, launched in 2004, which aims to
stimulate market activity in the Bank’s seven lowest-income countries of
operations by using a streamlined approach and flexible lending instruments to
finance more and smaller projects. With the help of this initiative, and
increased staffing in the Bank’s Armenia Resident Office, the EBRD has already
significantly expanded operations in Armenia, signing 12 deals in 2005 for €17
million. For the next two years, the EBRD will work to expand small and medium
sized business and micro-enterprise financing, primarily through credit lines
to local partner banks, but also directly through the Bank’s Direct Lending
Facility and Direct Investment Facility as well as through co-financing and
risk sharing with local banks under the Bank’s Medium Sized Co-financing
Facility (MCFF). The EBRD will increase support for local banks by supporting
new products such as mortgages. It will expand its Armenian Multibank
Framework Facility to include equity and subordinated debt. It will also seek
to provide finance to insurance, leasing and regulated micro-credit companies.
Turn-Around Management and Business Advisory Services, providing management
and consultancy support, will likewise be expanded. In infrastructure, the
EBRD will support creditworthy renewable energy and energy efficiency
projects, and will consider commercial financing of private operators in
transport, public utilities and transport infrastructure and, in exceptional
cases with significant grant co-financing, pursue sovereign backed projects.
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