The International Monetary Fund (IMF) has approved the disbursement of a $16.3mn tranche of aid to support economic growth to Armenia, as part of a three-year Extended Fund Facility (EFF) programme.

The EFF for Armenia was approved in March 2014, and envisions the provision of $127.6mn to support a rebound in economic activity, further progress in poverty reduction, inflation stabilization, and a reduction in outstanding fiscal and external vulnerabilities.

After the approval the latest tranche, the institution would have disbursed $48.9mn as part of the EFF.

Simultaneously, the IMF completed its second review of Armenia's performance under the programme, and noted that “Armenia’s performance under the program has been adversely affected by weaker-than-expected external conditions and deviations from some programme policies. The authorities’ policy response has helped mitigate the initial impact of the shocks but the outlook remains challenging. Steadfast implementation of the agreed measures will be necessary to meet the objectives of the fund-supported programme, rebuild buffers and policy space, and unlock Armenia’s growth potential. "

The IMF highlighted four specific areas in which Yerevan should focus its attention in order to boost economic growth, namely currency stability, fiscal consolidation, the financial rehabilitation of the electricity sector, and structural reforms to enhance competition and regional integration.

“Going forward, it is important to return to greater exchange rate flexibility and to limit interventions to preserve and strengthen buffers and to support external adjustment. Monetary policy should be carefully calibrated to maintain price stability. Gradual normalisation of monetary conditions through unwinding of the emergency measures introduced in 2014 would also help support a resumption of bank lending and growth... After a period of fiscal easing to support activity, fiscal consolidation will be needed to ensure debt sustainability. Adjustment should focus on revenue gains to protect and increase capital and social spending and support medium-term growth. The new tax code provides an opportunity to broaden the tax base by eliminating exemptions and addressing gaps and thereby to support both consolidation and increases in growth-enhancing spending," said Mitsuhiro Furusawa, deputy managing director at the IMF, said in a statement.