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Armenia: World Bank Sees Reasons For Optimism

Washington, 27 August 1997 (RFE/RL) - The World Bank says there are reasons for optimism for Armenia's external situation because of rapidly growing trade with Iran, greatly increased informal trade with both Azerbaijan and Turkey, and the recovery of the Georgian economy.

These factors have increased Armenia's integration with international markets, says the bank, which will continue to deepen, driven by progress on dealing with regional conflicts and prospects for an area boom linked to the development of Caspian Oil.

The bank made the assessment after its affilate for the poorest nations, the International Development Association (IDA), yesterday approved two loans totaling about $65 million for Armenia.

The larger $60 million credit will be used to improve financial discipline in the private and public sectors, accelerate the growth of the private sector and strengthen the social safety net to ensure essential health and education services.

As part of the program, the real level of social benefits will be raised while payments will be reviewed to make sure they are going to the most vulnerable segments of the population. The public pension system will also be reformed and private pension schemes will be introduced.

Another aspect of the program will work to increase tax collections and reduce tax arrears, which IDA says are necessary to cut the budget deficit while maintaining essential public services.

Additionally, the program will begin the financial rehabilitation, commercialization and eventual privatization of the electric power industry and introduce reforms and improvements in the water and irrigation sectors.

The second credit for around $5 million is to finance a lengthy list of technical assistance projects such as completing the computerization of the State Tax Inspectorate, starting a pilot program of privatization through public offerings, and support for a program of judicial reforms.

IDA credits carry a small annual fee but no interest charges and are repayable in 35 years, with an initial grace period of 10 years.