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Mr. Enrique A Gelbard and Jimmy McHugh

Over the past four years, real GDP growth in Armenia has outpaced that of its neighbors and other low-income countries, averaging 12 percent a year (see chart). Also, since 2001, inflation has been low, at an annual average rate of 4 percent, and poverty and inequality have fallen rapidly. The government’s sustained commitment to economic stability and reform, especially since 2001, has been a critical element in this progress. Armenia is now at a cusp—more reforms can spur further gains, but faltering could put them at risk.

Mr. Clinton R. Shiells, Mr. John R Dodsworth, and Mr. Paul Henri Mathieu
This paper explores from a regional perspective the distorted nature of trade in energy products within the CIS countries. The persistence of pricing distortions, barter arrangements, and discriminatory access to pipelines, as well as failure to honor contracts, has disrupted and distorted energy exports to non-CIS countries, undermined energy sector reforms, and distorted investment decisions. The paper focuses on cross-border issues as an integral component of the wider problem of inefficient energy use within the CIS. Several policy recommendations are proposed, including measures to foster greater competition, reduce state involvement, and promote regional cooperation.
Mr. Prakash Loungani and Mr. Paolo Mauro
This paper documents the scale of capital flight from Russia, compares it with that observed in other countries, and reviews policy options. The evidence from other countries suggests that capital flight can be reversed once reforms take hold. The paper argues that capital flight from Russia can only be curbed through a medium-term reform strategy aimed at improving governance and macroeconomic performance, and strengthening the banking system. Capital controls result in costly distortions and should gradually be phased out as part of that medium-term strategy.
Mr. Michael Keen and Benjamin Jones
Negotiations toward a successor to the Kyoto Protocol on climate change have come to a critical point, and domestic climate policies are being developed, as the world seeks to recover from the deepest economic crisis for decades and looks for new sources of sustainable growth. This position paper considers the challenge posed by these two policy imperatives: how to exit from the crisis while developing an effective response to climate change. Blending the objectives of a sustained recovery and effective climate policies presents both challenges and opportunities. Although there are potential “win-win” spending measures conducive to both, the more fundamental linkages and synergies lie in the broader strategies adopted toward each other. Greater climate resilience can promote macroeconomic stability and alleviate poverty; and carbon pricing, essential for mitigation, can contribute to the strengthening of fiscal positions that is expected to be needed in many countries. There are, nevertheless, also difficult trade-offs to face, notably in the somewhat greater caution now warranted in moving to more aggressive emissions pricing. However, the simple policy guidelines for addressing climate issues remain fundamentally unchanged; the need to deploy a range of regulatory, spending, and emissions pricing measures.
International Monetary Fund. External Relations Dept.
The IMF Executive Board announced on August 3 that it had completed the ninth review of Turkey’s economic program supported by the three-year Stand-By Arrangement. The Board’s decision will enable Turkey to draw SDR 1.2 billion (about $1.5 billion) immediately from the IMF. The text of News Brief No. 01/73, as well as a statement issued on July 28 by IMF First Deputy Managing Director Stanley Fischer (see page 262) is available on the IMF’s website (

This paper uses a variant of the IMF’s Global Economy Model (GEM) to illustrate how the macroeconomic impact on the United States of the rise in energy prices since the end of 2003 may vary depending on the source of the energy market imbalance. If oil market supply-side factors are driving prices higher, GDP will be permanently lower than it otherwise would be. However, if higher energy prices reflect primarily increased demand due to rising labor supply or tradable sector productivity growth in emerging Asian economies, for example, then GDP in the United States could actually rise in the long run. This occurs because the United States receives some positive terms-of-trade effects coming through nonenergy tradable goods prices that offset the negative implications for GDP of permanently higher energy prices. IMF Staff Papers (2008) 55, 285-296. doi:10.1057/imfsp.2008.7; published online 8 April 2008

The Trinidad and Tobago economy is the largest among member countries of the Caribbean Community (CARICOM), with a gross domestic product in 2000 of almost $8 billion.

International Monetary Fund. External Relations Dept.

Following are edited excerpts of a press briefing by IMF Managing Director Horst Köhler on May 25, in Washington, D.C. Thomas Dawson, Director of the External Relations Department, also participated. The full text is available on the IMF’ s website (

International Monetary Fund. External Relations Dept.

In 2005, Trinidad and Tobago’s economy grew by about 8 percent, underpinned by strong growth in the energy sector, according to the IMF’s annual economic review. The nonenergy sector, also vibrant, expanded by 7¾ percent, thanks to public infrastructure spending and rapid credit growth that fueled private spending. With global energy prices still high, the economy is on pace to expand by 12½ in real terms in 2006.