YEREVAN (Noyan Tapan)–The Executive Board of the International Monetary Fund Monday approved the second phase of a three-year Enhanced Structural Adjustment Facility–part of the multi-year ESAF loan first approved by the IMF in February 1996.
The three-year ESAF loan totals $150 million–of which $50 million was used during 1996–and now the second $50 million can be borrowed.
The first $25 million of the 1997 package will be disbursed to Armenia on June 30–and the release of the second half will be disbursed subject to successful completion of the mid-term review–to be conducted by an IMF team in October 1997.
The purpose of the ESAF lending is to bolster Central Bank reserves in order to provide an adequate cushion to the balance of paymen’s–in order to meet import and debt paymen’s with sufficient foreign exchange. The ESAF loan is granted at a highly confessional interest rate of 0.5 percent–with a 5-year grace period before repaymen’s begin.
As there is no collateral for the ESAF loans provided by the IMF–member governmen’s themselves agree to certain conditions of economic performance to guarantee sustainable economic growth in order that the loans can be repaid in the future. In the case of Armenia–the government has pledged an ambitious reform program that will ensure real growth–a low rate of inflation–a diminishing government deficit and limits on the incurrence of new official external debt–increased tax collections and reforms of tax administration–improvemen’s in the commercial banking system–and a variety of legal and regulatory reforms to improve the economic environment for enterprise development.
The IMF Executive Board praised the strong reform program already achieved by the Government of Armenia–and–in tandem with the Structural Adjustment Credits provided by the World Bank–predicted that the ESAF-supported programs in Armenia will be successful in strengthening the transition to a well-functioning market economy.