InternationalWorld Bank approves $85 million loan to Armenia
Seeks to mitigate impact of global economic crisis
Published: Friday February 27, 2009
Aristomene Varoudakis, the World Bank’s country manager for Armenia. Armen Hakobyan / Armenian Reporter
Yerevan - The World Bank on February 24 approved a package of four operations, for a total amount of $85 million, to help Armenia mitigate the impact of the global economic crisis. This package is the first installment on a four-year $525 million World Bank commitment made in January.
Aristomene Varoudakis, the World Bank's country manager for Armenia, discussed the details at a press conference on February 25. The International Bank for Reconstruction and Development, which is part of the World Bank, will make its first-ever loan to Armenia. It will finance a $50 million "Access to Finance for Small and Medium Enterprises Project" to support local businesses.
The loan will provide financing to domestic banks for on-lending to the small and medium enterprise sector, in order to support investment, create jobs, and improve the resiliency of Armenia's private and financial sectors in the face of the global economic crisis.
The credit line will support small and medium enterprise development through a difficult period, when these businesses are facing increasing challenges in raising finance through the banking system or through remittances. Under the terms of the loan, the Central Bank of Armenia will enter into subsidiary loan agreements with eligible banks for on-lending to enterprises at market rates. The initial ceiling on individual sub-loans is set at $150,000.
The IBRD loan is provided with a maturity of 26.5 years, including a five-year grace period.
Mr. Varoudakis said the IBRD loan is made possible by the change in Armenia's status from a low-income country to a lower-middle-income country after several years of rapid economic growth; it is also made possible by "Armenia's strong foundation of implementation capacity and policy reform momentum."
Other programs
A second project is the "Lifeline Roads Improvement Project," which will receive $25 million. This project supports the rehabilitation of some 100 km of rural roads, connecting local communities to the main arteries. The construction project is expected to generate about 800 jobs (or 200,000 job-days) for Armenian workers. That is in addition to the benefits of the roads, once rehabilitated.
The third project is $8 million in financing for the Social Investment Fund, which will support small-scale investments in 55 of the poorest communities of Armenia. It is also expected to create short-term employment.
The fourth and final project is the Rural Enterprise and Small Scale Commercial Agriculture Development Project, which will receive $2 million in financing. The project will complete 35 community-focused economic development projects and extend support to five to seven new communities.
The last three projects are provided through the International Development Association, with a maturity of 20 years, including a grace period of 10 years.
Mr. Varoudakis took the opportunity to predict that the economic slowdown may not cause a recession in Armenia, but further growth of the economy in 2009 is unlikely.
