Accessibility links

Breaking News

Armenia: New Government Likely To Proceed With Economic Reforms

Yerevan, 7 June 1999 (RFE/RL) -- World Bank President James Wolfensohn says a new Armenian government set to take over in the wake of last Sunday's parliamentary elections is unlikely to roll back economic reforms pursued since the early 1990s. He said on Friday that an agreement has been reached with Armenian leaders on the release of more Bank funds to back up the country's transition to the market economy.

Wolfensohn, on a two-day visit to Armenia, spoke to reporters in Yerevan after a meeting with Defense Minister Vazgen Sarkisian and Soviet-era leader Karen Demirchian - the leaders of the Miasnutyun (Unity) alliance, which won the polls. Miasnutyun's landslide victory was mainly attributed to Demirchian's popularity resulting from a drastic decline in living standards since the collapse of the Soviet Union. The bloc campaigned on a largely populist platform that called for the state's greater involvement in economic affairs.

Wolfensohn described Thursday's meeting with the Miasnutyun chiefs as "extremely positive." He said he "came away very reassured that" what he called "these two very experienced men have a clear vision for the economic and social development of the country".

The powerful defense minister is widely expected to replace the liberal Prime Minister Armen Darpinian before the new Armenian parliament convenes for its first session later this month. Some political commentators have speculated that a Miasnutyun-controlled cabinet might be at odds with President Robert Kocharian, who is a staunch proponent of economic liberalization.

Wolfensohn said that it appeared to him that Kocharian "has pretty good relations with those who have won the elections." He added that "they seem to have a similar sense of direction as to where the country is going."

Armenia is heavily dependent on regular financial injections from Western institutions, with more than $500 million in funds borrowed from the World Bank since 1992. Analysts say Yerevan has little choice but to stick to the reform course, which often involves taking unpopular measures.

Wolfensohn said he was reassured by Sarkisian and Demirchian that the new cabinet will not introduce any changes in this year's government budget. He said it was his understanding that "they will be completing this phase of the budget cycle, which is another six months". He said that during this period "we'll have an opportunity of establishing priorities and determining what programs we can work on together."

In his campaign speeches, Demirchian, who ruled Soviet Armenia from 1974-1988, pledged to make education and health care more accessible for the poor and to provide the stagnating industry and agriculture with cheap credit. If implemented, these measures could mean more government spending. A substantial part of Armenia's budget deficit is already financed by the World Bank, which last December announced a $65 million loan package for that purpose. Wolfensohn said he expects a second $15 million tranche to be disbursed by the end of this month. He also said the Bank is encouraged by Armenia's progress in economic reform and plans to release roughly $240 million in new loans over the next three years.

A Bank press release said three new infrastructure and judicial reform projects worth a total of $90 million are "in an advanced stage of preparation." According to Wolfensohn, the efficiency of using credit resources in Armenia "has improved considerably" in the last two years. He said, quoting, "We are doing much, much better and no projects are at risk". In his words, "there is still much to be done, but I'm very optimistic."

Despite continuing single-digit economic growth and relatively low inflation registered since 1994, most Armenians have yet to experience a major rise in their living standards. The growth continued into the first half of this year despite the persisting effects of the economic crisis in Russia, which has hit Armenian exports to one of the country's most important markets.

Economists agree that Armenia's conflict with Azerbaijan over the disputed Nagorno-Karabakh territory continues to take a heavy toll on economic development.