Economic News from Armenia
Stronger Dram To Dampen Impact Of U.S. Aid To Armenia
By Anna Saghabalian
The appreciation of the Armenian national currency, coupled with
increased prices of construction materials, has dramatically reduced the
scale of infrastructure projects in Armenia financed by the U.S.
government and other Western donors, Transport Minister Gurgen Sargsian
said on Tuesday.
Sargsian singled out nationwide roadwork which the Armenian government
plans to carry out with financial assistance from external sources and
the U.S. Millennium Challenge Corporation (MCC) in particular.
The United States approved in early 2006 $235.6 million in additional
economic assistance to Armenia under its Millennium Challenge Account
(MCA) program managed by the MCC. Most of the promised aid is to be
spent on rebuilding and expanding the country's battered irrigation
networks. Another $67 million was set aside for capital repairs of about
1,000 kilometers of rural roads that have fallen into disrepair since
the Soviet collapse.
`The 937 kilometers [of roadwork] envisaged by the Millennium Challenge
Account has shrunk to about 330 kilometers,' said Sargsian. `That is, we
can't repair those 937 kilometers with the same sum anymore. We can only
do only one third of the planned work.'
The Armenian dram has gained more than one third in nominal value
against the U.S. dollar since the infrastructure projects were approved
by the two governments in late 2005. The past three years have also seen
a surge in the cost of construction materials fuelled by Armenia's
ongoing construction boom.
The MCC has yet to disburse the bulk of the promised assistance to
Armenia which is conditional on the implementation of political and
economic reforms by its government. The executive director of the
corporation, John Danilovich, and other U.S. officials have warned that
the aid package could be suspended or terminated altogether unless the
Yerevan government ends its crackdown on the opposition and restores
civil liberties restricted following last February's disputed
presidential election.
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Armenian Central Bank Approves Another Rate Rise
By Emil Danielyan
The Central Bank of Armenia (CBA) increased its benchmark interest rate
for the fourth time in as many months on Tuesday, citing mounting
inflationary pressures on the country's economy.
The CBA board decided to raise the re-financing rate by 25 basis points
to 7 percent just days after its former chairman, Prime Minister Tigran
Sarkisian, expressed concern about rising inflation in the country.
According to official statistics, Armenian consumer prices rose by more
than 7 percent in the first five months of 2008, surpassing the
government's and the CBA's full-year target of 4 percent. The consumer
price index appears to have been primarily pushed up by the increased
international prices of foodstuffs such as wheat, cooking oil and
butter.
Speaking at a weekly cabinet meeting on Thursday, Sarkisian effectively
admitted that Armenian companies enjoying a de facto monopoly on imports
of those products are also responsible for the `very high' inflation
rate in addition to global market trends. He said the international
prices of wheat and rice have fallen significantly over the past four
weeks and instructed government bodies to make sure that there are
corresponding price adjustments in Armenia as well.
In a statement, the CBA board said that the decreased cost of some of
the imported foodstuffs is being offset by soaring international oil
prices. It also said that growing domestic consumer spending carries
`additional inflationary risks.'
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The CBA's re-financing rate stood at 4.75 percent in spring 2007.
The appreciation of the Armenian national currency, coupled with
increased prices of construction materials, has dramatically reduced the
scale of infrastructure projects in Armenia financed by the U.S.
government and other Western donors, Transport Minister Gurgen Sargsian
said on Tuesday.
Sargsian singled out nationwide roadwork which the Armenian government
plans to carry out with financial assistance from external sources and
the U.S. Millennium Challenge Corporation (MCC) in particular.
The United States approved in early 2006 $235.6 million in additional
economic assistance to Armenia under its Millennium Challenge Account
(MCA) program managed by the MCC. Most of the promised aid is to be
spent on rebuilding and expanding the country's battered irrigation
networks. Another $67 million was set aside for capital repairs of about
1,000 kilometers of rural roads that have fallen into disrepair since
the Soviet collapse.
`The 937 kilometers [of roadwork] envisaged by the Millennium Challenge
Account has shrunk to about 330 kilometers,' said Sargsian. `That is, we
can't repair those 937 kilometers with the same sum anymore. We can only
do only one third of the planned work.'
The Armenian dram has gained more than one third in nominal value
against the U.S. dollar since the infrastructure projects were approved
by the two governments in late 2005. The past three years have also seen
a surge in the cost of construction materials fuelled by Armenia's
ongoing construction boom.
The MCC has yet to disburse the bulk of the promised assistance to
Armenia which is conditional on the implementation of political and
economic reforms by its government. The executive director of the
corporation, John Danilovich, and other U.S. officials have warned that
the aid package could be suspended or terminated altogether unless the
Yerevan government ends its crackdown on the opposition and restores
civil liberties restricted following last February's disputed
presidential election.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Armenian Central Bank Approves Another Rate Rise
By Emil Danielyan
The Central Bank of Armenia (CBA) increased its benchmark interest rate
for the fourth time in as many months on Tuesday, citing mounting
inflationary pressures on the country's economy.
The CBA board decided to raise the re-financing rate by 25 basis points
to 7 percent just days after its former chairman, Prime Minister Tigran
Sarkisian, expressed concern about rising inflation in the country.
According to official statistics, Armenian consumer prices rose by more
than 7 percent in the first five months of 2008, surpassing the
government's and the CBA's full-year target of 4 percent. The consumer
price index appears to have been primarily pushed up by the increased
international prices of foodstuffs such as wheat, cooking oil and
butter.
Speaking at a weekly cabinet meeting on Thursday, Sarkisian effectively
admitted that Armenian companies enjoying a de facto monopoly on imports
of those products are also responsible for the `very high' inflation
rate in addition to global market trends. He said the international
prices of wheat and rice have fallen significantly over the past four
weeks and instructed government bodies to make sure that there are
corresponding price adjustments in Armenia as well.
In a statement, the CBA board said that the decreased cost of some of
the imported foodstuffs is being offset by soaring international oil
prices. It also said that growing domestic consumer spending carries
`additional inflationary risks.'
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The CBA's re-financing rate stood at 4.75 percent in spring 2007.
INFLATION IN ARMENIA HITS 9.9% IN MAY, YEAR-ON-YEAR
RIA Novosti
June 2 2008
Russia
YEREVAN, June 2 (RIA Novosti) - Consumer prices in Armenia grew 9.9%
in May, year-on-year, the national statistics service said on Monday.
Food prices increased 1%, compared with April this year, while non-food
prices grew 1.3%, and tariffs for services climbed 21%.
The prices of gasoline and diesel fuel soared to 5.7% and 7.5%,
compared with April this year, respectively.
The Armenian government's inflation target for 2008 is 4%.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
RIA Novosti
June 2 2008
Russia
YEREVAN, June 2 (RIA Novosti) - Consumer prices in Armenia grew 9.9%
in May, year-on-year, the national statistics service said on Monday.
Food prices increased 1%, compared with April this year, while non-food
prices grew 1.3%, and tariffs for services climbed 21%.
The prices of gasoline and diesel fuel soared to 5.7% and 7.5%,
compared with April this year, respectively.
The Armenian government's inflation target for 2008 is 4%.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
MILLENNIUM CHALLENGE CORPORATION ALLOCATES $19 MLN FOR ARMENIA IN JAN-MAY 2008
ARKA
June 2, 2008
YEREVAN, June 2. /ARKA/. The Millennium Challenge program allocated
some $19mln for Armenia in January-May 2008, Executive Director of
the Millennium Challenge-Armenia Foundation Ara Hovsepyan reported.
"The program implementation is running according to the schedule,"
he said. "We had difficulties in implementing the road construction
program which is now being agreed with the corporation."
The foundation plans to submit an application to the Millennium
Challenge Corporation for further financial assistance for
July-September programs, according to Hovsepyan. However, he did not
mention the exact sum.
The Executive Director of Millennium Challenge-Armenia pointed out
the corporation has partly satisfied the foundation's application
on financing $11mln worth April-June programs by allotting $4mln
for Armenia.
The corporation said it needs time to study thoroughly the application.
Under the agreement signed on March 27, 2006, the Millennium Challenges
Corporation is to allocate $235.65mln for irrigation systems and
community roads in Armenia.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Sarkisian Names New Customs Chief
By Emil Danielyan
President Serzh Sarkisian appointed the new chief of the Armenian
customs on Wednesday, a move that came on the heels of his harsh
criticism of rampant corruption among customs officials.
The State Customs Committee (SCC) will be run by Gagik Khachatrian, who
has until now worked as its deputy head.
The previous SCC chief, Armen Avetisian, was fired shortly after
Sarkisian took office on April 9. During his tenure the SCC solidified
its reputation as one of the country's most corrupt government agencies.
Nonetheless, Avetisian's sacking came as a surprise given the fact that
he has long been regarded as Sarkisian's protégé.
The new Armenian president acknowledged and deplored `thriving'
corruption within the SCC at a high-profile meeting with its leadership
held on April 17. Sarkisian said customs officials abet smuggling to
illegally enrich themselves and penalize importers refusing to pay
kickbacks. He threatened to fire those of them who will fail to `work
honestly.'
Although the blistering attack was not followed by sweeping personnel
changes, local businessmen involved in import operations say that the
scale of bribery, nepotism and other corrupt practices in the customs
has decreased considerably over the past one-and-a-half months. Many of
them wonder if the change is irreversible.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
ARKA
June 2, 2008
YEREVAN, June 2. /ARKA/. The Millennium Challenge program allocated
some $19mln for Armenia in January-May 2008, Executive Director of
the Millennium Challenge-Armenia Foundation Ara Hovsepyan reported.
"The program implementation is running according to the schedule,"
he said. "We had difficulties in implementing the road construction
program which is now being agreed with the corporation."
The foundation plans to submit an application to the Millennium
Challenge Corporation for further financial assistance for
July-September programs, according to Hovsepyan. However, he did not
mention the exact sum.
The Executive Director of Millennium Challenge-Armenia pointed out
the corporation has partly satisfied the foundation's application
on financing $11mln worth April-June programs by allotting $4mln
for Armenia.
The corporation said it needs time to study thoroughly the application.
Under the agreement signed on March 27, 2006, the Millennium Challenges
Corporation is to allocate $235.65mln for irrigation systems and
community roads in Armenia.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Sarkisian Names New Customs Chief
By Emil Danielyan
President Serzh Sarkisian appointed the new chief of the Armenian
customs on Wednesday, a move that came on the heels of his harsh
criticism of rampant corruption among customs officials.
The State Customs Committee (SCC) will be run by Gagik Khachatrian, who
has until now worked as its deputy head.
The previous SCC chief, Armen Avetisian, was fired shortly after
Sarkisian took office on April 9. During his tenure the SCC solidified
its reputation as one of the country's most corrupt government agencies.
Nonetheless, Avetisian's sacking came as a surprise given the fact that
he has long been regarded as Sarkisian's protégé.
The new Armenian president acknowledged and deplored `thriving'
corruption within the SCC at a high-profile meeting with its leadership
held on April 17. Sarkisian said customs officials abet smuggling to
illegally enrich themselves and penalize importers refusing to pay
kickbacks. He threatened to fire those of them who will fail to `work
honestly.'
Although the blistering attack was not followed by sweeping personnel
changes, local businessmen involved in import operations say that the
scale of bribery, nepotism and other corrupt practices in the customs
has decreased considerably over the past one-and-a-half months. Many of
them wonder if the change is irreversible.
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