Republic of Armenia: 2008 Article IV Consultation and Request for Three-Year Arrangement Under the Poverty Reduction and Growth Facility

This 2008 Article IV Consultation highlights that Armenia’s recent economic performance has remained strong, and the economy is poised for another year of double-digit growth. Rising inflation, a widening current account deficit, and rapid credit growth have raised concerns about overheating. Executive Directors have commended the authorities for the successful implementation of macroeconomic policies under the Poverty Reduction and Growth Facility (PRGF)-supported program that expired in May 2008. Directors have also welcomed the authorities’ intention to withdraw fiscal stimulus during 2008–09 to address current imbalances.


This 2008 Article IV Consultation highlights that Armenia’s recent economic performance has remained strong, and the economy is poised for another year of double-digit growth. Rising inflation, a widening current account deficit, and rapid credit growth have raised concerns about overheating. Executive Directors have commended the authorities for the successful implementation of macroeconomic policies under the Poverty Reduction and Growth Facility (PRGF)-supported program that expired in May 2008. Directors have also welcomed the authorities’ intention to withdraw fiscal stimulus during 2008–09 to address current imbalances.

Annex I. Armenia: Relations with the Fund: (As of September 30, 2008)

  • Mission: Discussions were held in Yerevan on September 3–16, 2008.

  • Country interlocutors: The mission met with Mr. T. Sargsyan (Prime Minister), Mr. T. Davtyan (Minister of Finance), Mr. N. Yeritsyan (Minister of Economy), Mr. A. Javadyan (Chairman of the Central Bank), other senior officials, and representatives of the donor community, private sector, and civil society.

  • Team: Ms. Castello-Branco (head), Messrs. Bonato and Floerkemeier (all MCD), Mr. Gracia and Ms. Everaert and Mr. Harrison (FAD), and Mr. Darius (SPR). Mr. Pérez (MCD) and Mr. Yakusha (OED) participated in the policy discussions. Ms. Oomes (resident representative), Ms. Manookyan, and Mr. Stepanyan (economists in the local office) assisted the mission.

  • Exchange rate regime: managed float with no pre-determined path for the exchange rate.

  • Fund relations: Armenia has accepted the obligations under Article VIII Sections 2, 3, and 4, and maintains an exchange system free of restrictions on payments and transfers for current international transactions, except for exchange restrictions maintained for security reasons that have been notified to the Fund pursuant to Executive Board Decision No. 144-(52/51).

  • Data: Armenia's data are adequate for surveillance and program monitoring. Armenia subscribes to the Special Data Dissemination Standard (SDDS).

  • Outreach: Meetings with parliamentarians, NGOs, donors, and private sector; press conference and press statement.

  • Consultation cycle: 24 months.

I. Membership Status: Joined 05/28/1992; Article VIII

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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VI. Projected Payments to Fund 1/ (SDR Million; based on existing use of resources and present holdings of SDRs)

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VII. Safeguards Assessment

Under the Fund’s Safeguards Assessments policy, an update safeguards assessment of the Central Bank of Armenia (CBA) is currently underway with respect to the prospective arrangement. An earlier update assessment completed on November 7, 2005 found that the CBA’s safeguards framework has been strengthened since the initial assessment completed in 2002.

VIII. Exchange Rate Arrangement

(a) The exchange rate system can be classified as a managed float without a predetermined path. During 2005–07, the CBA intervened heavily in the foreign exchange market to smooth out volatility in the exchange rate. The official exchange rate is quoted daily as a weighted average of the previous day’s interbank exchange rates.

(b) Armenia maintains no exchange restrictions on the making of payments and transfers for current international transactions except for exchange restrictions maintained for security reasons, and notified to the Fund pursuant to Executive Board Decision No. 144-(52/51).

IX. Article IV Consultations

The 2006 Article IV consultation with Armenia was concluded on November 22, 2006. Armenia is subject to a 24-month consultation cycle.

X. FSAP Participation and ROSCs

A joint World Bank-International Monetary Fund mission assessed Armenia’s financial sector as part of the Financial Sector Assessment Program (FSAP) update during February 16–March 4, 2005. The Financial Sector Stability Assessment (FSSA) report was discussed by the Executive Board on May 25, 2005.

ROSC Modules

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XI. Resident Representatives

Ms. Nienke Oomes, since August 2006.

XII. Technical Assistance

The following table summarizes the Fund’s technical assistance to Armenia since 2002.

Armenia: Technical Assistance from the Fund, 2002–08

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Annex II. Armenia: Relations with the World Bank: (August 1, 2008)

Country Director: Donna Dowsett-Coirolo

Telephone: (202) 473-0121

I. Implementation of Structural Reform Measures

A. Legal Framework

1. The World Bank has supported the Armenian government to establish the core legal framework necessary for private sector operations, including the Civil Procedure Code, the Procurement law, the Business Registration law and the Public Auction law. The fully restructured and enacted Bankruptcy law is now harmonized with the Civil Code and the Civil Procedure Code, and strengthens the enforcement mechanisms for bankruptcy procedures. The Concession law has been enacted and the National Assembly has adopted a new Labor Code, which is compatible with the requirements of a market economy and is an important instrument of flexible job-creation. The government also has made significant progress in drafting the necessary legislation to improve the lending environment through strengthening the procedures for collateral registration and for foreclosure and enhancing the knowledge of the judiciary concerning commercial contracts. Specifically, the government has adopted amendments to civil code, criminal code, civil procedure law, law on compulsory enforcement, and public auction law. With support and advice through the Judicial Reform Project (JRP) supported by the World Bank, the Judicial Leadership and the Government were able to formulate the long term development course for the judicial system reflected in particular in Judicial Code and consequent establishment of the Judicial Department responsible for judicial administration and career public service in judicial system (excluding judges). JRP made all the normative legal acts available electronically through ARLIS legal database with free on-line access and CD/DVD versions are also available. The number of visitors to the website of ARLIS has grown dramatically after launching the database in end 2005. Special automated case management information systems were developed and piloted for courts (CAST) and Enforcement Service for Judicial Acts (AESMS). CAST has been already rolled-out across the entire judicial system. The World Bank has also supported the rehabilitation of 13 courthouses housing 15 courts and the installation of digital case recording audio systems.

B. Business Environment

2. The World Bank has supported the government to make satisfactory progress in removing administrative barriers for business and investment and has strengthened the consultative mechanisms with the business community. The steps taken include, inter alia, consolidating, downsizing, and clarifying mandates of various government inspections; enacting the new law on business registration; streamlining licensing procedures; issuing new accounting recommendations for small and medium-sized enterprises; establishing a regulatory framework that allows privatization of urban land by business entities; and adopting simplified procedures for obtaining site development and construction permits. The capacity of the Armenian Development Agency as a focal point for government’s efforts to promote investment and exports as well as for identifying the remaining bottlenecks in the business environment has been strengthened. The functioning of the Business Council has been improved and the private sector’s awareness of its activities has been enhanced.

3. The recent business surveys of Armenian entrepreneurs suggest that these efforts have already resulted in a more positive private sector perception of the business and investment environment. For example, the average time necessary to get construction and building renovation permits was reduced from 310 days in 2001 to 112 days in 2006. FDI increased by almost 3-fold in 2007 compared with 2005. As part of the PRSC supported programs, Customs introduced a self declaration system and reduced the role of reference prices. It has also provided public access to customs values through the official customs website (

4. On tax administration, the government strengthened the operation of Large Tax Payers Unit (LTPU), which should help to reduce the stock of VAT refunds owed to exporters and ensure that no additional VAT arrears will be incurred to exporters.

5. The government adopted decision announcing its intention to widen participation in the provision of international civil aviation services, raise efficiency and cut costs and initiated policy work. Despite these improvements, there is still considerable scope for further reforms in the areas of competition, deregulation and strengthening of business and investment climate, especially in commercial debt recovery procedures, improvements in the transparency and efficiency of the judicial system, tax and customs administrations, improvements in governance and implementing the anti-corruption strategy.

6. In addition to the above-stated, further strengthening of both tax and customs administration were at the core of the PRSC IV, A series of measures have been adopted by STS aimed at promoting the development of the self-assessment system. A separate division for taxpayer service has been established within the STS headquarters designated for (i) defining the policies and procedures of taxpayer education and assistance for tax inspectorates, (ii) overseeing the performance of taxpayer service divisions of tax inspectorates, and (iii) managing the taxpayer education and assistance operations throughout the STS. The capability of this unit was built up. Under PRSC-IV, the near term agenda for reforms was fleshed out. A work plan for improving the enforcement of the Law on Declaring Individuals’ Property and Income was developed. Recording commissions were abolished as of July 1st 2008.

7. The administrative and audit capacity of the LTPU was strengthened under the PRSC-supported program. Reforms focused on legislative initiatives to facilitate effective tax audits and on development of personnel, institutional and administrative infrastructures in support of LTU. An annual audit plan based on risk classification, priorities and targets was introduced. Other measures, such as periodic publication of the list of 300 large taxpayers and changes in the management practices greatly helped to increase the productivity of this unit. PRSC supported reform agenda the Government of Armenia introduced changes to the structure of the STS by which, the large taxpayers, banking and financial, excise, and mining inspectorates were merged into one inspectorate - the Large Taxpayers Inspectorate.

8. Over the PRSC program, significant structural improvements were achieved in customs administration, such as the introduction of modern software and improved personnel practices. The central reform was the institution of direct trader input (DTI) that currently covers about 70 percent of imports. DTI has initiated a systemic change away from the intimate involvement of customs officials at the declaration validation stage, where opportunities for discretionary behavior are rife. The system has the capability to provide for immediate validation and assessment of acceptable declarations. Under PRSC-IV, the working of DTI was made increasingly effective through the implementation of a comprehensive post-release review program for imports. The post-release reviews are being increasingly effective in ensuring proper customs administration whilst minimizing the opportunities for poor governance.

9. PRSC-IV also supported the detailed preparatory technical work for the introduction of a bank guarantee mechanism for approved importers to facilitate the smooth flow of imports, strengthen the rules-based regime, reduce risks, and minimize the interface between importers and customs officials as is the case in all advanced countries. Legislative amendments for the implementation of guarantees were approved by the government at end-September 2007. Progress has also been made in selectivity of customs control. A risk-based system was introduced under the PRSC program. Reforms in this area under the PRSC program have led to greater automaticity and predictability in clearance of goods, reduced discretion and lowered business costs. The reform program has introduced transparent and swift procedures destined to facilitate trade while safeguarding revenue collection in line with established international good practice.

C. Energy and Infrastructure

10. Since its privatization in the second half of 2002, the Electricity Distribution Company has remained in compliance with its licenses agreement as confirmed by making full payments to the generation and service providers, reporting to the regulator on a timely basis, and submitting investment plan to the regulator. Supported by the World Bank, the government and the regulator have also made satisfactory efforts to improve the legal and regulatory framework in the energy sector in order to establish a supportive environment for the new private operator. The market rules in the energy sector have improved. The Electricity Distribution Company is allowed to enter into direct contracts with the electricity generators and service providers, which has enhanced sector transparency. The regulator has adopted and enforced service quality standards for electricity supply. Despite this satisfactory performance, continued efforts are crucial for improvements in the energy sector through restructuring the midstream companies and strengthening the regulatory framework to ensure adequate functioning, transparency, and reliability of this sector.

11. There has been progress in improving fiscal discipline and reducing losses in the irrigation and water sectors. The World Bank has been working with the government to: (i) upgrade the management capacity of public companies in these sectors; (ii) ensure a gradual increase in tariffs to cost recovery; (iii) provide additional investments to improve technical efficiency; and (iv) ensure that the budget provides adequate financing for water consumed by public sector entities. The World Bank has supported an innovative public-private partnership in water supply, which has substantially increased reliable water supply throughout the country (70% of Yerevan now has 24 hour service). The government has adopted a schedule for irrigation tariff increases in order to move closer to full cost recovery in the irrigation system. As part of the PRSC III reforms, the Government has also developed and now considering a step-by-step civil aviation liberalization action plan. Railway restructuring plan and development of telecommunication regulations are also underway.

D. Education and Health

12. The World Bank has supported reforms in education and health. The government implemented a major rationalization program during the 2003 school year. As a result, 37 schools were merged or closed and about 9,000 teachers were made redundant. Later in 2006, during the second phase of the reforms, in the scope of the staff optimization and social assistance program approximately 3,200 new redundant teachers have been registered and were provided with different type of social assistance. The medium-term action plan for improving the financial management, accounting, and financial reporting for higher education institutions was adopted by the government on January 26, 2003. Accountants at the higher institutions have been trained and special software has been prepared for use. Since the second quarter of 2003, the new accounting procedures are being used. The government increased the state budget allocation for primary and secondary education and improved teachers’ salaries. The government also developed an action plan and cleared arrears in the education sector and prevented further arrears in this sector. The ratio of pupils to full-time equivalent teachers increased to over 14 and teacher salaries increased by 65 percent in 2005, by 16.1 percent in 2006, and by 27.0 percent in 2007. In addition, the government approved a strategy on preschool education and a pilot project for its implementation in two marzes. The government has also made initiatives to carry out the three year implementation plan for higher education reforms. Despite these improvements, there is scope for further reforms in education, including adoption of new curricula for upper secondary education in the framework of the transition to 12-year general secondary education, strengthening the strategy for teacher education and ongoing professional development, enhancing capacities of IST use and its integration in teaching and learning, introduction of new mechanisms of higher education financing and establishment of a national quality assurance framework, enhancement of standards for higher education to make it more responsive to employers’ needs, setting a student loan system, promoting school readiness and equal opportunities through improved preschool education system and increasing enrollment rate, and strengthening monitoring and financial reporting of the noncommercial organizations (NCOs) in the education sector.

13. The government adopted the hospital master plan for Yerevan in late 2002. As a result, the remaining public hospitals in Yerevan were to be merged into smaller number of hospital networks with necessary steps to be taken to restructure them. The government adopted a decree on November 21, 2003, identifying the configuration often hospital networks through consolidation of twenty-four public hospitals and thirteen outpatient health care institutions. Significant investment has been done through the WB financed project to upgrade physical condition, equipment and improve internal management and governance of three hospital mergers in Yerevan , which demonstrated the biggest efficiency gains. while the hospital merger process in capital city has been implemented with notable progress in productivity and efficiency indicators in selected hospital networks, introduction of further appropriate adjustments is required. In addition, in 2006 the Government adopted a regional hospital optimization/modernization plan, aimed at improving efficiency and productivity of outpatient services in regions. The consolidation of regional hospitals in smaller networks is in the process. The medium-term action plan for improving financial management accounting and reporting for the public hospitals was adopted by the government to prepare new reporting and accounting procedures and cost accounting manuals. The Government plans to conduct independent financial audit of all public hospitals for the next three years.

14. Implementation progress has been satisfactory and about 200 hospital accountants have been trained in new accounting procedures. All public hospitals use updated financial management and accounting procedures. The government cleared all accumulated arrears in the health sector. Furthermore, the level of public financing in health sector has been continuously increasing as projected under the MTEF The government also adopted a decision to introduce further reforms in the Basic Benefit Package in the health sector. The Government strategy for increasing revenues in the short term is to not expand the benefits package but to raise the reimbursement rates to reduce the gap with the cost of services. The government undertook measures for increasing financing of the Primary Health Care in order to secure access to quality basic health services, in particular for the poor and in rural areas. Further reforms are needed in increasing the population overall health status, reducing child and maternal mortality, increasing use of healthcare system by rural and low-income groups, monitoring public health and promoting better health behavior, and strengthening monitoring and financial reporting of the noncommercial organizations (NCOs) in the health sector. The government developed the national strategy on combating non-communicable diseases and plans to take necessary steps to address the public health threats from non-communicable diseases through development and implementation of specific priority programs on non-communicable diseases and through allocation of adequate public resources in the health care budget.

E. Social Protection and Insurance

15. Since 1999, the government has been replacing a range of fragmented cash and non-cash benefits and privileges with better-targeted transfers to families. The government has been supported by the World Bank to complete several important steps to enhance its capacity for administration of transfers to families, including: (i) re-registration of poverty benefit recipients; (ii) beneficiary assessment of the existing benefits; and (iii) establishment of a central database for poverty benefit recipients. Data from the recent household survey suggest that the system of benefits and transfers to the poor has become an efficient instrument for reducing extreme poverty. The government introduced differentiation of benefits within the family poverty benefits. Continued efforts are needed to ensure the adequacy of the level and administrative capacity of the social protection systems to guarantee coverage of transfers to people with special needs.

16. The Government of Armenia is in the process of designing a new pension system. In August 2007 the Government prepared a new Draft Framework Law on Pension Reform in Armenia which defines benefits and beneficiaries of pillars zero and pillar one and the accumulation phase of the mandatory accumulation system. The draft pension reform concept would also involve the mandatory introduction of a second pillar for those above 30 years of age financed by an add-on contribution rate, a flat-benefit budget-financed first pillar and a universal zero-pillar for those that did not contribute to the system. Prior to the Law enactment, the fiscal and social impact of the selected design of the pension system is being assessed and compared to alternative solutions. A Pension Task Force has been established in the Government to analyze these issues.

II. Lending

17. World Bank lending to Armenia as of August 1, 2008 totals US$ 1,056.1 million, (including 2 GEF operations) of which US$953.3 million has been disbursed. The current Bank portfolio consists of 17 IDA credits and 2 GEF projects, for a total commitment of $291.7 million, of which $187.5 million is disbursed. Armenia portfolio continues to be low risk with the projects rated as satisfactory or moderately satisfactory. In FY08, one investment operation—Irrigation Development: Additional—was approved in July 2007 for $5 million and one development policy operation—PRSC-IV for $18.5 million—was approved in November 2007.

18. Building on the major Poverty Reduction Strategy Paper’s (PRSP) themes, the fourth Country Assistance Strategy (CAS) for Armenia was discussed in the World Bank Board of Executive Directors on June 10, 2004 and focuses on three main objectives of: (i) promoting private sector led economic growth; (ii) making growth more pro-poor; and (iii) reducing non-income poverty. CAS PR (Progress Report) was considered by the Board on March 8, 2007 and reconfirmed this focus. IDA country resource envelopes are determined annually based on the Country Policy and Institutional Assessments and performance of the ongoing portfolio. Armenia has a very strong IDA performance rating and as a consequence is eligible for about $56 million in FY09. In addition, based on a 2006 review of Armenia’s creditworthiness, Armenia is now eligible to receive IBRD lending, although it has not done so yet.

19. The CAS included four Poverty Reduction Support Credits (PRSCs) for FY05, 06, 07, and 08 which focused on four main components: (i) supporting private sector development and governance; (ii) advancing public infrastructure reforms; (iii) improving core public sector functions; and (iv) enhancing human development and improving social safety nets. All four have been extended and disbursed. The PRSCs’ preparation was closely coordinated with the IMF Poverty Reduction and Growth Facility (PRGF). A new economic reform dialogue has been initiated starting in FY09.

20. A new World Bank CPS will be prepared during FY09, which will lay out expected lending and analytic work for the next four years. This will be based on Armenia’s development priorities to be contained in the recent update of their Poverty Reduction Strategy Paper (PRSP), renamed Sustainable Development Program (SDP).

List of World Bank Lending to Armenia

(In millions of U.S. dollars)

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Annex III. Armenia: Relations with the European Bank for Reconstruction and Development (EBRD): (As of May 7, 2008)

1. As of December 31, 2007, the EBRD approved 50 projects in the power, transport, agribusiness, textile, mining, construction and financial sectors. Total commitments amounted to EUR 207 million.

2. There are three sovereign projects. First, the EBRD approved a sovereign guaranteed loan of EUR 54.8 million for construction of the Hrazdan Unit 5 thermal power plant in March 1993, partly aimed at the eventual closure of Armenia’s nuclear plant in Medzamor. The government is contemplating the privatization of Hrazdan Unit 5 as the completion of this plant is constrained by limited budgetary resources. The EBRD had funded technical assistance for the Hrazdan privatization prospectus and continues to follow the privatization process. The Hrazdan Thermal Power Complex excluding the unfinished Unit 5 was transferred to the Russian Federation in the context of the debt-for-equity deal. Second, in November 1994, the agreement on a EUR 21.8 million loan to build an air cargo terminal in Zvartnots airport was signed under a guarantee by the Armenian government. The airport was transferred to private management in 2002. The new management has prepared a master plan for the development of the airport, which is expected to generate further cargo traffic for the cargo terminal. Third, the EBRD approved a 7 million EUR loan to the State Committee for Water Systems, owner of the water and wastewater assets located in the small municipalities outside of Yerevan, in April 2007. The proceeds of this loan will be used to improve wastewater treatment in five municipalities located near Lake Sevan.

3. Most of the Bank’s projects in Armenia are in the private sector. The EBRD has provided a loan to the Yerevan Brandy Company owned by Pernod Ricard of France (EUR 16.5 million). In the banking sector, a first equity participation in the Commercial Bank of Greece-Armenia (EUR 1.1 million) was approved in late 1999 and a second equity participation in Armeconombank was approved in 2004. The Bank also acquired an equity stake in an Armenian non-bank financial intermediary, CIRCO, an insurance subsidiary of Cascade Capital. Moreover, a multi-bank on-lending facility of EUR 10 million was activated in early 2000. Within the framework of multi-bank facility the Bank currently has credit lines for micro and small enterprises with three local banks (a total of EUR 8.0 million). The EBRD is committed to further expanding lending under this facility to other banks. A Trade Facilitation Program with the purpose to facilitate access of Armenian banks to trade financing was also made available to four Armenian banks. In 2002, a loan to finance EUR 2.9 million in working capital expansion was signed with the Armenian Copper Program (the only copper smelter in the region), and a new loan (EUR 4.3 million), including the refinancing of the existing loan, was signed in August 2004. Moreover, the EBRD has launched the Turn Around Management (TAM) and Business Advisory Service programs in Armenia in 2003, originally funded by the EU-Tacis program but now funded from the ETC Fund, to support micro, small, and medium-sized enterprises. There were seven new projects completed during 2004 for a total amount of EUR 6.7 million. Two of them are in the banking sector (including equity investment), one in general industry sector (direct investment in equity of a local enterprise), one pre-export finance facility with a local company in the extractive industry and three trade facilitation programs with local commercial banks. Commitments during 2005 include a trade facilitation project with a local bank, two direct lending facility with a small hydro power plant and gold mining company, three new SME loans, three equity investment projects with a pharmaceutical company, plastic preform manufacturer (under Direct Investment Facility), an insurance and reinsurance company, and two medium-sized co-financing facility allowing local banks to share the risk of their selected clients with EBRD. During 2006 the EBRD signed 2 projects with the total commitments of Euro 20 million—one of them an on-lending long-term loan to support renewable energy projects, and the other one to Armenian International Airports CJSC to complete the construction of a new international passenger terminal. In the financial sector EBRD undertook two equity investments in 2007 with foreign strategic co-investors (ProCredit and ITB-Byblos) and two further A/B syndications with international commercial banks for ACBA-Credit Agricole and Armeconbank. Additionally, two new Trade facilitation program (TFP) facilities were launched.

4. The key priorities of the EBRD for the coming years are: (i) financial sector; (ii) enterprise sector, particularly SME and micro-enterprise financing through credit lines to Armenian banks or direct loans and equity investments, (iii) infrastructure investments in the development of alternative energy sources and municipal infrastructure projects and (iv) portfolio monitoring and implementation support. The EBRD’s current country strategy was approved in February 2006.

Annex IV. Armenia: Statistical Issues

1. Data provision has some shortcomings, but is broadly adequate for surveillance. Further improvements in real, fiscal, and external sector statistics would be desirable in order to facilitate enhanced design and monitoring of economic policies. The overall quality, timeliness, and coverage of macroeconomic statistics have improved significantly over the past few years. The Fund has substantially facilitated this process through technical assistance from the Statistics Department, the Fiscal Affairs Department, and the Monetary and Capital Markets Department. On November 7, 2003 Armenia subscribed to the Special Data Dissemination Standard (SDDS). The April 2008 data ROSC mission prepared a detailed evaluation of the quality of the macroeconomic statistics.

Real sector statistics

2. The National Statistics Service (NSS) has made significant changes to the national accounts methodology to bring it in line with best international practices although some shortcomings on data sources and methods remain. Progress has been made in developing estimates of monthly and (constant price) quarterly GDP that are now published. Basic data collection procedures have also partially improved. The national accounts statistics are compiled following the conceptual frameworks of the 1993 SNA and ESA 95. The classification of value added by economic activity follows the ESA 95 directions and data are published grouped accordingly to the A3, A6, A17 and A60 codes of the EU nomenclature of economic activities.

3. Annual and quarterly GDP estimates are compiled at current prices, at comparable previous year’s prices, and at average annual prices of the base year (1998) for the series up to the year 2006. Since 2007, GDP at constant prices is computed at average annual 2005 prices. The April 2008 ROSC mission found that compilation techniques for the estimates of GDP by production at constant prices are sound, however there is still need for improvements in the corresponding estimates of GDP by expenditure, particularly regarding the deflators of imports and exports. The mission also found that government expenditures and some transactions with the rest of the world are recorded on a cash basis rather than the required accrual method. Moreover, quarterly data are still collected on a cumulative basis, which are likely to undermine their accuracy. Additionally, statistical techniques need improvements regarding the estimates of the imputed rental services for owner-occupied dwellings, consumption of fixed assets, and work in progress in agriculture.

4. The CPI covers 11 large population centers and the capital city. Since January 2006 the CPI has been computed using 2005 weights. Concepts and definitions used in the compilation of the CPI are broadly in line with international standards; source data and compilation techniques are generally adequate. The NSS compiles a ten-day and a monthly CPI. The ten-day index and the monthly index are disseminated jointly.

Government finance statistics

5. The budget execution reporting system compiles data on a cash basis supplemented with monthly reports on arrears and quarterly reports on receivables and payables. Daily revenue and cash expenditure data for the central government are available with a lag of one to two days. The Ministry of Finance (MoF) is undertaking a comprehensive reform of the treasury system, including the introduction of an internal auditing system in line ministries and their budgetary institutions. A single treasury account (TSA) was introduced in 1996, and all bank accounts held by budgetary institutions were closed, except for Project Implementation Units that are required by donors to operate with commercial banks’ accounts. Starting in 2002, some budgetary institutions have been converted into “noncommercial organizations” (NCOs). These units have been taken out of the treasury system and have their own bank accounts but report data on cash flows and balances to the MoF since 2003. These exceptions notwithstanding, all government receipts and payments are processed through the TSA, although there are still shortcomings on the timeliness and quality of data on the operations of local governments. Classification of government transactions by function and economic category are generally in line with the Manual on Government Finance Statistics 1986, and monthly data on central government operations are disseminated one month after the reporting period.

6. By law, expenditures are classified and presented in the budget in accordance with the 1986 GFSM, but the MoF is working to implement the Government Finance Statistics Manual 2001 (GFSM 2001). The budget presentation and the classification of items under the economic and functional classification of expenditures needs to be made more transparent; for instance, the data have been subject to frequent reclassifications, and wages for military personnel are reported in the broader category of “other” goods and services rather than as a wage item. The reconciliation of central government with general government operations is done by the NSS in cooperation with the MoF.

7. The authorities submitted cash data, converted to the framework of the GFSM 2001 for publication in the 2007 Government Finance Statistics Yearbook. The authorities began providing data for publication in the IFS in July 2007. The GFSM 2001 implementation plan is currently limited to bringing the classification of budgetary central government revenue, expense, and transactions in nonfinancial assets in line with international practices.

Monetary and financial statistics

8. Monetary and financial statistics are provided on a timely basis. Daily data on the accounts of the Central Bank of Armenia (CBA) are provided weekly with a one-day lag, while weekly data on the monetary survey are provided with a one-week lag. The balance sheets of the CBA and of the deposit money banks follow IAS methodology. Monthly interest rate data are provided with an one-week lag.

9. Responding to a STA request, the CBA has compiled and submitted a complete set of monetary data beginning from December 2001 using Standardized Report Forms (SRF). STA validated the resulting monetary aggregates and the data have been published since the December 2006 issue of IFS Supplement and are used to update IFS. An Integrated Monetary Database (IMD) has also been established by STA to share the SRF data with MCD.

External sector statistics

10. The coverage of external sector data has improved in recent years. Trade statistics are provided on a timely basis, and trade data by origin, destination, and commodity are generally available within a month. Price data for exports and imports are less readily available. Quarterly balance of payments statistics are generally available with a three-month lag. However, on remittances, which account for a significant part of the inflows, there are considerable discrepancies among available source data. Survey data are considerably lower than data obtained through the money transfer system. The NSS and CBA are working on establishing a compilation program that would enable proper measurement of remittances. The absence of a comprehensive, continuously updated business register hampers the coverage of transactions and institutional units; in particular, the coverage of the financial account items for the private nonbank sector.

11. Quarterly data on international investment position are published by the NSS within one quarter after the reference period, and the annual data within two quarters; and are also provided for publication in IFS.

Armenia: Table of Common Indicators Required for Surveillance

(As of October 10, 2008)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); and Not Available (NA).


When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Republic of Armenia: 2008 Article IV Consultation and Request for a Three-Year Arrangement Under the Poverty Reduction and Growth Facility: Staff Report; Staff Supplement; Staff Statement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for the Republic of Armenia.
Author: International Monetary Fund