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IMF Sees Increased Growth In Armenia

Mark Lewis, head of an IMF mission visiting Yerevan
Mark Lewis, head of an IMF mission visiting Yerevan
YEREVAN -- The International Monetary Fund (IMF) has said the Armenian economy is recovering from the global recession faster than expected and should expand by around 4 percent this year, RFE/RL's ArmenianService reports.

But senior IMF official Mark Lewis, who is on a visit to Yerevan, also cautioned that sustained growth in Armenia requires significant improvements in tax administration and the business environment.

Both the IMF and Armenian officials forecast late last year a growth rate of only 1.2 percent for 2010, citing the lingering impact of the global financial crisis on the domestic economy. The authorities revised the projection upwards after the country recorded a 5.5 percent increase in GDP in the first quarter this year.

Lewis said the Armenian economy is "gradually recovering" even though economic conditions are still difficult. "Growth is expected to rebound in 2010, external inflows are picking up, and public finances have improved," he said.

But Lewis warned that the growth will be stunted by poor tax collection, arbitrary actions by tax officials, and the presence of "powerful oligopolies," which he said play an important role in the domestic economy. He repeated an IMF argument that the amount of taxes collected by the government is "very low by international standards" in both absolute and relative terms.

The government's tax revenues were the equivalent to almost 16.5 percent of Gross Domestic Product last year. The proportion is one of the lowest in the former Soviet Union, highlighting the scale of tax evasion in Armenia.

Nonetheless, the IMF mission seemed largely satisfied with the results of its two weeks of negotiations with Armenian officials.

A written statement issued by the IMF said Armenian authorities have pledged, among other things, to "widen the tax base through improvements in the tax administration."

The mission said it will recommend that the IMF's Executive Board disburse a fresh $52 million to Armenia soon. Yerevan has already received roughly $560 million in anticrisis loans from the fund since March 2009.