Yesterday the World Bank approved the four credit program package worth $85 million aimed at helping Armenia to overcome the aftermath of the global crisis. Besides that another grant project was approved, which anticipates to help Armenia diversify its energetic resources.
The latter is aimed at conducting land exploration of Gridzor and Karkar areas of Syunik and Gegharkunik marzes. And the 85 million USD is part of the 525 million USD. The document was signed by Armenian Finance Minister Tigran Davtyan and director of the WB Yerevan office Aristomene Varoudakis. The minister said at the press-conference that followed the signing ceremony that the credits of the WB are directed to mellowing of the negative affect of the world economic crisis at the economy of Armenia. He also added that the programs will pass the quick procedure of ratification. The biggest credit $50 mln will be directed to development of small and medium-sized business in Armenia. It will be given at the conditions of IBRD – with repayment term 26,5 years, privileged payment period over the first 5 years and with the current rate of interest 4% per year. These conditions are harsher than the privileged ones, but admissible for Armenia, the minister said. All the rest loans Armenia will receive at traditionally privileged conditions of the IDA – with 20 years repayment term, privileged payment period over the first 10 years and 0,75% rate of interest. The credit $25 mln is foreseen for construction of 100 km long of village motor ways in 2009. The credit $8 mln will be given to Social Investments Fund to fulfill social programs, and the credit $2 mln – to give credits to agriculture companies, the minister said. The grant agreement at $1,5 mln was also approved. It will be directed to development of geo-thermal energy in Armenia. Davtyan also added that the package of credits at $85 mln that has been approved recently, it is the first part of the strategy of the WB aid to Armenia for 2009-2012 at $525 mln. To note, since 1992 Armenia has received credits from the World Bank at the total sum $1,1627 mln. The largest of these loans, worth $50 million, will be provided to several Armenian commercial banks that will in turn lend the funds to local small and medium-sized businesses in need of credit. Another $25 million will be spent on the construction of rural roads and other infrastructure, which is due to start this spring. According to the press release of the WB this credit is allotted for a period of 26.5 years, 5 of which will be given by a privileged term. This credit will be given to commercial banks with a percentage of 8.25%. According to the agreement the credit to be given to each business is 150.000 USD. “The Bank’s ability to provide this support in a timely manner has been made possible by Armenia’s strong foundation of implementation capacity and policy reform momentum,” Head of the World Bank Yerevan Office Aristomene Varudakis told reporters. Armenia may register zero GDP increase in 2009”, he said. According to him, this foresight is conditioned by the bad situation of the global economy and especially is difficult the economic situation of Russia which according to Varudakis is the main companion of Armenia. At the same time, it has been known on February 25 that the World Bank lent 85 million dollars to Armenia for 20 years term and another 10 years on concessionary terms. The loan will be directed to the development of infrastructures, additional financial assistance to the social investments fund, rural rehabilitation and development of private rural economy as well as promotion of small and midsize businesses. “I think at best one could expect flat growth,” said Aristomene Varoudakis, head of the World Bank office in Yerevan. He pointed to official statistics that showed Armenia’s Gross Domestic Product shrinking in the fourth quarter of last year. The fourth-quarter drop explains why full-year economic growth in Armenia slowed to 6.8 percent in 2008 after six consecutive years of double-digit expansion. The economy is being hit increasingly hard by recent months’ fall in international prices for non-ferrous metals and large-scale cash remittances from Armenians working abroad. Varoudakis did not exclude that the worsened economic outlook may force the Armenian government to revise its spending and targets for 2008 downwards. “It is very important for the budget to reflect the economic situation so that the government, the National Assembly and the public know what the necessary measures are,” he told journalists.