Author: Vanyan Gary

World Markets Research Centre
Global Insight
February 19, 2010

Staff Level Conclusion Reached on Armenian IMF Programme Review

BYLINE: Venla Sipila

An International Monetary Fund (IMF) mission has reached a preliminary
agreement on its third review under Armenia’s stand-by arrangement.
The Fund notes that the government has successfully implemented
policies addressing the vast macroeconomic challenges encountered last
year. Further, it observes that output now seems to be stabilising,
and the real economy is expected to recover this year. Macroeconomic
policies remain on track to support the economic recovery, while at
the same time managing any potential emerging demand pressures. The
Fund further notes that, while inflation has picked up, this mainly
reflects exogenous effects and pass-through from the dram depreciation
experienced in early 2009, in addition to administrative price
increases over last year, rather than representing worrying
potentially destabilising price pressures. Indeed, the Fund trusts
that the policies are in place to guide the inflation rate back down
to the target level in the near term. Public finances are
strengthening, and the level of external reserves is comfortable,
allaying fears related to balance of payments weakness. Looking
forward, the IMF recommends that Armenia continues on its structural
reform path to strengthen tax administration, to further support
financial sector soundness, and to increase competition and
productivity of the economy, as means of securing sustained economic
growth and safeguard macroeconomic stability.

Significance:The staff-level completion of the programme review now
needs to be followed by the final approval of the IMF’s Executive
Board, due to discuss the review in late March. A successful
conclusion would allow Armenia to withdraw an additional disbursement
of 48.49 million SDR (Special Drawing Rights, some US$74 million). It
is important that Armenia continues to comply with the terms of its
IMF programme, as access to concessional credits for now remains
crucial for the economy to find its way back towards sustained growth
and towards consolidation of its external balances. Poverty reduction
still remains a key programme goal, and the sovereign could not
service a heavy commercial debt load. Assuming that reforms keep
progressing and Armenian access to external support from international
financial institutions thus remains good, Armenian external solvency
risks, while high, should remain manageable, although debt ratios are
still expected to deteriorate this year .

news.am, Armenia
Feb 20 2010

Armenia to realize Turkey’s threat in drug traffic, trafficking: A. Ghazaryan

16:28 / 02/20/2010Before Armenia-Turkey border opening Armenian armed
forces should carry out a hard work, President of the Union of
Manufacturers and Businessmen of Armenia Arsen Ghazaryan told NEWS.am.

According to him, Armenia should not beware of Turkey’ damping policy,
but think over a threat it sheds in terms of drug traffic and
trafficking. Ghazaryan recalled international reports saying that
Turkey is one of the leading countries in drug trafficking.

Under the UN report of 2009, 90% of European drug markets is
controlled by Turks.

S.T.

Interfax, Russia
Feb 18 2010

Armenian CB hikes refinancing rate from 5.5% to 6%

YEREVAN Feb 18

The Central Bank of Armenia has increased the refinancing rate from
5.5% to 6% pa, effective February 17, the Bank said.

Armenia saw December-to-January inflation of 1.7%, the Bank said.

January inflation year-on-year was 7%, exceeding target by 1.5
percentage points.

The Bank council stated that rising world prices for raw commodities
and basic foodstuffs, as well as the gradual resurrection of aggregate
demand in light of broad budgetary and tax policy, helped constrain
inflationary impact.

The previous refinancing rate change in Armenia was on January 20,
2010 – from 5% to 5.5%. The Central Bank cut the rate 0.25 percentage
points to 5% on September 8, 2009.

FOUR LEADER-BANKS DETERMINED BY THE POSITION HELD IN ARMENIAN BANKING SYSTEM

ArmInfo
2010-02-18 13:00:00

ArmInfo. ACBA-Credit Agricole Bank, VTB-Armenia, Ardshininvestbank
and HSBC Bank Armenia have occupied the leading positions in the
banking system of Armenia upon the results of 2009.

According to the analysis made by Financial Information Service of
ArmInfo News Agency for the Analysis and Ranking of the Commercial
Banks of Armenia quarterly bulletin, the position of each bank was
determined by the own methodology with account of indicators of the
total capital, assets, total credit investments, credits in the
economy, investments in securities, total liabilities, attracted
funds and undistributed profit. Unlike the previous analysis, the
"position" indicator took into account the loro and nostro accounts,
credits to individual persons, demand liabilities, fixed deposits,
interbank deposits and credits. According to ArmInfo analysts, four
banks, which have become leaders by the cumulative analysis of the
afore-mentioned indicators, meet the leadership also by the size
of assets.

So, the total assets of ACBA-Credit Agricole Bank made up 162,7 bln
drams, HSBC Bank Armenia – 135,8 bln drams, VTB-Armenia – 120,7 bln
and Ardshininvestbank – 119,4 bln. By the position held, these four
banks "breathe down the neck" of Unibank, with assets of 108,6 bln
drams and Ameriabank, with assets of 103,5 bln. According to ArmInfo
analysts, in view of transfer to IFRS international standards, the
commercial banks of Armenia were deprived of a specific standard of
the reporting being published and appendices to it, in view of which
the banks disclose their data at their sole discretion, that creates
serious difficulties in assessment of the bank’s real financial state
and the banking system in general. In the conditions of the financial
crisis, such "various readings" conflict with the declared policy of
information openness and transparency of the Armenian banking system.

ARMENIAN-TURKISH BORDER: WHICH STRATEGY WINS?

news.am
Feb 17 2010
Armenia

"The interests of Russia and United States in our region were and do
remain conflicting. Although they keep on speaking of ‘restarting’
relations, these are mere talks," Ruben Mehrabyan, expert for
the Armenian Center for Political and International Studies, told
NEWS.am. "In fact, the two superpowers’ interests have remained
unchanged, and they are still observing the rules of zero sum game,"
he said.

As to what accounts for the fact that the Armenian-Turkish relations
proved to be the issue Russia and United States reached an agreement
on in the context of the Caucasus, Mehrabyan said: "Russia and
United States have different motives. Americans do not want the
Armenian-Turkish relations to be linked to the Nagorno-Karabakh peace
process — for the Armenian-Turkish border to be reopened to enable
Armenia to get rid of absolute dependence on Russia. It will give
the United States access to the Caucasus not only through Georgia,
but also through Armenia. Americans believe that Armenian-Azerbaijani
relations will not register any changes for a rather long period.

"But Russia, which controls Armenia’s entire system and ‘lucrative’
economic sectors, wants the border to be reopened. Russians do not
want it to be linked to the Nagorno-Karabakh peace process either,
as, following their own strategy, they view Nagorno-Karabakh as a
hook for Armenia and Azerbaijan to hang on."

Which of the strategies will prove the winner should the
Armenian-Turkish border be reopened? "First of all, it is turkey
that is to re-open the border. I am sure that no Turkish authorities
will take the risk unless any progress in the Nagorno-Karabakh peace
process takes place. But if the border is re-opened, Russia will lose
its monopoly over Armenia. Moscow is well aware it cannot retain
‘one hundred percent’ so it is following this way to relieve the
tension in the South Caucasus after the Russian-Georgian conflict
and diversify its presence by converting it from politico-military
into economic presence," Mehrabyan said.

MF: IN 2010 GDP GROWTH IN ARMENIA TO MAKE UP 2%

ArmInfo
2010-02-17 18:35:00

ArmInfo. In 2010 the economic growth in Armenia will make up about 2%,
International Monetary Fund Mission Chief to Armenia Mark Lewis told
journalists in Yerevan, Wednesday.

According to him, temperate growth is expected in the ore mining
sphere, agriculture and services. At the same time, he pointed out
that after the year 2009 full of heavy challenges, the GDP index has
stabilized, and real GDP is expected to recover in 2010.

To note, the state budget of Armenia has approved 1.2% GDP growth for
2010. At the same time, according to the forecasts of the Central Bank
of Armenia, the economic growth in Armenia will make up at least 0,5-2%
in 2010.

ARMENIAN NATIONAL DEBT IS STABLE: IMF

news.am
Feb 17 2010
Armenia

Foreign debt size of Armenia is not very high, declared head of IMF
mission to Armenia Mark Louis at the press conference in Yerevan.

He offered Armenian authorities to obtain soft loans and select
programs that will yield profit and provide efficient spending of
credit funds. "If this is not ensured, Armenia’s state debt will
increase," he stated.

Commenting on the fact that since 2013 servicing of Armenia’s public
debt will cost 20% of budget ($480m), Louis said: "Indeed, state
of Armenia’s foreign debt is stable. Speaking of banking system in
the country, banker outlined that is viable, strong and was managed
accordingly in a complex 2009 year.

US CONGRESS NOT TO RECOGNIZE "ARMENIAN GENOCIDE"

news.az
Feb 16 2010
Azerbaijan

Zahid Oruj According to Zahid Oruj, the discussions in the US Congress
will not lead to recognition of the mythical genocide of Armenians.

According to member of the MM committee on security and defense, today
the "armenian genocide" has been recognized by almost 50 countries
and more than 40 US states. In addition, some states pay compensation
to Armenia.

Yet, he considers that the official recognition of "genocide" in
the US Congress would have affected the interest of this country as
Turkey is an irreplaceable strategic partner of the United States in
the most important region in the Middle East.

According to the deputy, the widely spread opinion about the strong
influence of the Armenian lobby on the US policy is much exaggerated.

ARMENIA SUPPORTS KAZAKHSTAN’S IDEA TO CONVENE OSCE SUMMIT IN LATE 2010

ArmInfo
2010-02-16 17:16:00

ArmInfo. Armenia supports Kazakhstan’s idea to convene OSCE Summit
in late 2010, Foreign Minister of Armenia Edward Nalbandian said
in a joint press conference with his Kazakh counterpart, the OSCE
Chairperson-in-Office Kanat Saudabayev in Yerevan on Tuesday. "We
also welcome the idea of the OSCE informal ministerial to be held in
July 2010 in Kazakhstan. The agenda of the summit will become more
exact after the informal ministerial meeting," Edward Nalbandian said.

For his part, Kanat Saudabayev said that 11 years have already passed
since the first such summit. "Over those years the world has faced
many new challenges and threats. Some of these threats have absolutely
changed the traditional perception of the concepts of "war," "enemy".

I mean the international terrorism, the so-called "protracted"
conflicts that are still unsettled. Over that period of time many new
such conflicts have originated. Afghanistan is still the source of
international terrorism and drug traffic. There are issues related to
the New European Security Architecture. These are the very issues and
problems that must be put on agenda on the OSCE leaders. Therefore,
President Nazarbayev defined such meeting among priorities of our
chairmanship," K. Saudabayev said. He said that many countries support
this idea and today Kazakhstan has actually launched coordination of
the content and determination of the date of the meeting. "I think
that this will become an important event for enhancing security and
cooperation in the entire space of the Organization from Vancouver
to Vladivostok on the one hand and will help strengthening the
Organization and increasing respect and trust in us on the other hand,"
the OSCE CIO said.

CONVERSE BANK ANNOUNCES "SUPER CHANCE BY MASTERCARD" CAMPAIGN

ArmInfo
15.02.2010

ArmInfo.On February 15 Converse Bank has announced about the launch of
"Super Chance by Master Card" campaign, which will last till July 15.

The press-service of the bank told ArmInfo that within the frames of
the campaign, the payment debit cards Cirrus/Maestro and MasterCard
Standard, as well as the credit cards MasterCard Standard and Gold
will be provided for 6-month period of free service, afterwards the
tariffs fixed by the bank will start operating.

Visa and ArCa card holders applying for MasterCards for attaching
to the card account will not pay for servicing of the cards already
in operation for 6 months either. According to the results of the
campaign, a draw will be held among 300 holders of MasterCards with
the biggest volume of turnover, and the winners will receive domestic
appliances and other prizes.

According to the data of Armenian Card, as of 1 Feb 2010, ArCa member
banks issued 61264 cards of MasterCard system.