IMF STUDY HIGHLIGHTS WESTERN DONOR PRAISE FOR ARMENIAN REFORMS

December 15, 2005
Eurasia Daily Monitor
By Emil Danielyan

The Armenian authorities' economic policies have received another Western endorsement with the publication of extensive research conducted by a group of economists from the International Monetary Fund. In a research paper unveiled on December 6, they describe as "impressive" Armenia's decade-long economic growth and offered a generally positive outlook for its medium-term development prospects.
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The IMF experts attribute the growth to a "combination of well-sequenced reforms and persistent commitment to macroeconomic stability." "Key reforms include the liberalization of prices, trade, investment, and the foreign exchange regime; privatization; deregulation; creation of an independent central bank; and the reduction of fiscal and quasi-fiscal imbalances," they write.

Those reforms have also drawn accolades from other Western donors like the World Bank and the European Bank for Reconstruction and Development. The EBRD, for example, regularly rates the ex-communist countries of Eastern Europe and the former Soviet Union on nine specific indicators of economic reform, including privatization, enterprise restructuring, and price liberalization. Its latest Transition Report released on November 14, gave Armenia the highest indicator scores in the Commonwealth of Independent States. The Armenian economy has also been repeatedly rated as the most liberal in the CIS in annual surveys of economic freedom jointly conducted by the U.S. Heritage Foundation and the Wall Street Journal.
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But paradoxically, there are no indications that the number one social problem, unemployment, has been significantly alleviated. The unemployment rate may still be as high as 30%, and finding a decent job remains extremely difficult, especially for young educated people. The problem is also highlighted by the plight of those people who have returned to Armenia from emigration in recent years. Migration experts said at a seminar in Yerevan on December 13 that many of the returnees are struggling to earn a living.

Many in Armenia believe that the growth has primarily benefited the wealthiest citizens that continue to avoid taxes. The government's tax revenues will make up only 16% of GDP this year, one of the lowest indicators in the former Soviet Union. That translates into still-modest government expenditures on education, healthcare, and public services.
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The IMF study also points out that that the country cannot realize its economic potential in full without open borders with Azerbaijan and especially Turkey. "Armenia's economic potential lies with an export-led development growth process, and further integration with its neighbors and main trading partners should be a priority," it says. "Such potential will only be realized when the artificial barriers to regional integration are removed."

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.