The International Monetary Fund (IMF) has made a very important agreement with Armenia, which clearly illustrates and proves that it has been displaying an impressive degree of economic resilience despite various uncertainties around the world. It should be noted that the IMF Executive Board made this decision as a result of Armenia’s successful handling of various regional challenges and preservation of macroeconomic and financial stability within recent years.
Armenia demonstrates exceptional economic performance despite challenges
The economy of Armenia has continued to perform very well despite challenges posed by various global environments and accompanying external shocks. Because of flexible government policies and unexpected labor and capital inflows, the country’s GDP per annum has continued to grow at an average rate of 8.9 percent for the last three years. The prospects for its economy appear bright, with growth forecasts of 5 percent and 5.5 percent for 2025 and 2026, respectively.
The country has managed to maintain stability on the macroeconomic and financial side amidst regional and global challenges. The Armenian banking sector boasts adequate capital and liquidity. The Central Bank of Armenia introduced a totally new monetary policy framework that focuses on risk and transparency. The country’s inflation rate will inch towards the Central Bank’s target rate of 3 percent due to flexible exchange rate policies that have acted as shock-absorbing tools.
The main central keeps stability within an updated framework
The new monetary policy framework adopted by the Central Bank of Armenia should focus monetary policy on steering inflation back to the 3 percent target based on data-driven decisions on the policy rate. The flexible exchange rate regime and sound levels of international reserves continue to cushion the economy against global disturbances.
IMF approves comprehensive financial support package
The IMF’s Executive Board has also approved a new 36-month Stand-By Arrangement valued at SDR 128.8 million, which is about US$175 million and covers 100 percent of Armenia’s IMF quota. The stand-by arrangement will help with policy and reform agendas, as well as stability and risk insulation. The Armenian government has made it clear that it will treat this standby arrangement on a precautionary basis, indicating confidence in its abilities.
Once approved by the Board, an amount equivalent to SDR 18.4 million, or approximately US$25 million, becomes available to Armenia immediately. The remaining proceeds will be disbursed in equal tranches, with these being subject to a review every six months. All these are done with a view to ensuring that there continues to be compliance with program criteria.
Key program features include:
- 36-month duration with precautionary treatment
- Six semi-annual review periods
- Immediate access to $25 million
- Focus on structural reforms and governance
The structural changes focus on sustainable growth goals
The strategy focuses on speeding up structural reforms aimed at redesigning the Armenian economy and promoting private sector-driven and job-rich growth strategies. Key focus will be on enhancing labor force participation and employment, as well as assisting various sectors with the diversification of exports. Various improvements associated with investment climate and governance will assist with these comprehensive strategies.
The government’s 2026 budget and medium-term fiscal consolidation strategy are viewed as being on track by IMF staff, with a slightly contractionary fiscal policy stance supportive of expenditure on refugees, health, and investment. Raising government revenues through a more comprehensive taxation base and various revenue administration actions will enable fiscal space for expenditure on preferred social and capital sectors with moderate levels of public debt.
The successful completion of this IMF program for Armenia shows that it remains committed to healthy economic and structural policies. The fact that it is a precautionary program implies that it has confidence in its management but still needs a safety cushion against global uncertainties. With this program, it will be well-positioned for continued sustainable growth.
