World Bank Supports Armenia in Creating Jobs and Enhancing Growth Sustainability

November 7, 2013

Policy reforms will boost growth and employment and contribute to the resilience of the economy

WASHINGTON, November 7, 2013 - The World Bank Board of Executive Directors today approved a US$ 72 million loan for the First Development Policy Operation (DPO) for Armenia to support reforms aimed at promoting macroeconomic stability, improving the business environment, and enhancing the economy’s resilience to shocks through measures to improve sustainability. This is the first DPO in a series of three operations, supporting the Government of Armenia in meeting its strategic objectives, including stronger job creation, which is Armenia’s overarching development challenge. The Operation is designed to help Armenia reduce poverty and promote shared prosperity through growth enhancing reforms.

“This Operation initiates the programmatic series that will complement Armenia’s development vision,” says Jean-Michel Happi, World Bank Country Manager for Armenia. “The proposed new series shifts the focus from mitigation against crisis vulnerability to a medium-term agenda for strengthening growth drivers. The Bank is committed to support the efforts of the authorities in meeting those challenges.”

The Operation is anchored on two pillars. The first pillar is aimed at strengthening competitiveness through critical business climate and public administration reforms. These are expected to contribute to job creation through reducing the costs of doing business for firms, expanding access to credit to SMEs, and increasing opportunities for employment and job creation through increased trade and connectivity within and outside Armenia. Public administration reforms supported under this pillar will also contribute to a more inclusive access to services, more efficient use of resources, and sound policy formulation. Through the second pillar, the DPO will enhance the Armenian economy’s resilience to shocks and long-term stability by creating fiscal space, supporting enhancements to the social protection system, more inclusive access to public goods and services, and protection of the environment.

In preparation of the first loan disbursement, the World Bank assisted the authorities in merging two inspection agencies, enhancing the operations of the credit reporting system, increasing the flexibility of recruitment and promotion of professional staff and discontinuing the mandatory periodical attestations, improving competition and transparency in civil aviation, clarifying aspects of the new funded pension system, reviewing tax exemptions and excise rates, increasing coverage of the Family Benefits Scheme, and submitting to parliament a new Environmental Impact Assessment law.

Over the medium term, the Operation will help the authorities to: i) reduce the burden on businesses from inspections by downsizing inspection agencies by 50 percent; ii) improve the efficiency and transparency of credit reporting, the collateral regime and bankruptcy framework for better access to credit for SMEs; iii) increase the attractiveness of the Civil Service for professional staff; iv) expand efficiency and transparency of the public administration through a wider and secure application of e-government systems; v) increase productivity and transparency of customs operations; vi) improve financial sustainability of drinking water and irrigation agencies; and  vii) ensure regular maintenance of more than 60 percent of roads.

“This development policy operation supports a package of reforms designed to spur consistently higher growth of the Armenian economy,” says Ulrich Bartsch, World Bank Senior Country Economist and Team Leader of the project. “We are helping the Armenian government in meeting the challenge of job creation through enhancing the competitiveness and sustainability of its economy.”

The First DPO includes an IDA credit equivalent of US$ 41 million and an IBRD loan of US$ 31 million. The IDA credit carries a maturity of 25 years including a grace period of 5 years and the IBRD loan has a maturity of 25 years including 10 year grace period.

Since joining the World Bank in 1992 and IDA in 1993, the total IDA and IBRD commitments to Armenia amount to US$1, 746 million.

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