World Bank approves new US $50 million loan for Armenia

The World Bank’s Board of Executive Directors approved today a new, EUR 45.8 million (US $50 million) loan for the Armenia Governance Development Policy Operation (DPO), a budget support operation.

The operation supports the government’s actions to strengthen economic, fiscal, and public sector governance by: (i) improving pro-competition, pro-trade and streamlined quality regulations and processes (ii) enhancing efficiency of revenue mobilization and public investment; and (iii) strengthening anti-corruption initiatives and the performance of the justice sector and the civil service.

The new lending comes on the heels of the widespread protests against weak governance and corruption in 2018 that culminated with the peaceful and historic “Velvet” Revolution. The newly elected government, armed with a strong mandate for change, has put forward an ambitious five-year reform program, which aims to improve competitiveness and spur economic growth while meeting the people’s demands for good governance, greater transparency, accountability and effective public services.

“This operation prioritizes core governance reforms, initial steps which set the foundations for longer-term reforms in a number of areas,” says Sylvie Bossoutrot, World Bank Country Manager for Armenia. “It is anchored in the 2019–23 government program and the Bank’s Country Partnership Framework for 2019–23, which highlight governance as a cross-cutting foundation. It focuses on those areas where strategic relevance, impact, and reform sustainability are high and where it can support building blocks for deeper change.”

Market competition, for example, is targeted through interventions to introduce a state aid control framework, develop a more transparent and rule-based tax administration system, strengthen the quality and efficiency of laws and regulations, and institute efficient and risk-based custom management.

Fiscal consolidation and expenditure efficiency are supported by measures to improve tax administration and establish a sounder public investment management system. Improved public sector governance would be strengthened by supporting a package of anti-corruption measures and enhancing the performance of the justice sector and civil service.

“A comprehensive assessment by the Bank identified the lack of a state aid-control framework as one of the key impediments to healthy competition in Armenia. Measures to promote competitive neutrality in the granting of state aid and incentives have not yet been put in place to level the playing field, foster market contestability, and prevent previously informal advantages provided to some firms from being replaced by formalized advantages,” says Genevieve Boyreau, World Bank Task Team Leader of the Project.

As part of the World Bank’s global commitment to climate change mitigation and adaptation, this operation will also support the assessment of the climate change impact of new regulations, as part of the implementation of a Regulatory Impact Assessment Framework. It will thus enable policymakers to make decisions informed by qualitative and quantitative assessment of the climate change impact of each new regulation and mainstream climate change adaptation and mitigation measures into legislative and regulatory packages.
The EUR 45.8 million (about US $50 million) is an IBRD loan of fixed spread, with a 14.5-year grace period and a total repayment term of 25.5 years.

Since joining the World Bank in 1992 and IDA in 1993, commitments to Armenia have totaled approximately US $2,429,734 million.