The Asian Development Bank (ADB) has approved a $50 million policy-based loan as part of an ongoing program of financial reforms to strengthen public debt and fiscal risk management and develop financial markets in Armenia.
The second subprogram of the Public Efficiency and Financial Markets Program supports the Government of Armenia’s efforts to consolidate fiscal reforms, reduce financial risks in the economy, provide a sustainable framework for financial markets development, and usher in a more conducive environment for private sector involvement in infrastructure development. ADB provided $40 million in October 2017 to the first subprogram.
“ADB is committed to helping the Government of Armenia improve its economic growth and financial stability outlook through policy and technical assistance,” said ADB Senior Financial Sector Economist Mr. João Farinha-Fernandes. “The reforms that enabled the approval of this $50 million policy-based loan will continue the efforts laid out in the first subprogram.”
While financial institutions in Armenia have improved their contribution to the country’s economy over the years, financial markets remain nascent. This limits the development of the private sector in the country, which is vital for Armenia’s growth and development. This situation is also affecting public finance, fiscal management, as well as macroeconomic and financial stability in the country—factors that are crucial in improving investment levels in Armenia, which has declined to 18% in 2017 from about 40% of gross domestic product before 2009.
Through various policy reforms, the Public Efficiency and Financial Markets Program is aimed at strengthening Armenia’s public debt and fiscal risk management through capacity building of various agencies including the Public Debt and Management Department as well as the Ministry of Finance. It also aims to improve the government’s securities market and money-market infrastructure, while broadening the range of financial instruments available to attract more private investments in the country. The second subprogram continued these reform efforts.
If the reforms are sustained, more developed financial markets will help Armenia in various ways, including supporting government funding in the domestic market; developing local capital markets; providing suitable instruments to authorities to deal with macroeconomic shocks and risks to financial stability; and improving the efficiency of capital allocation and intermediation in the country.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 67 members—48 from the region. In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in cofinancing.