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Middle East and Central Asia > Armenia, Republic of

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Cover IMF Working Papers
The Role of Budget Support in Growth and Adjustment: Evidence from One Hundred IMF-Supported Programs with Low-income Countries
Alexander Zaborovskiy
The use of IMF credit for budgetary financing (budget support) has surged in Extended Credit Facility (ECF) arrangements with low-income countries (LICs) post pandemic, yet its role in growth and adjustment remains understudied. This paper provides the first systematic analysis of budget support across all 100 ECFs approved since the PRGT’s inception in 2010. We develop a reduced-form model that captures how budget support affects the growth-reserves trade-off, where budget support substitutes for domestic financing and thus reduces crowding-out in domestic credit markets. The simulations are performed under wide parameter uncertainty reflecting limited evidence for LICs. Staggered difference-in-differences estimates on completed programs validate the model’s predictions, revealing average treatment effects on growth of 3.4 percentage points but 1.3 months of imports slower reserve accumulation by program end. These results fall at the upper bound of simulations, consistent with severe financing constraints in treated LICs. Budget support shows weak positive effects on fiscal and external adjustments, though not statistically robust, suggesting that it does not weaken consolidation incentives and that sustainable adjustment depends primarily on policy strength and fundamentals rather than financing modalities. Critically, budget support acts as a catalyst contingent on program completion: off-track programs experience particularly adverse growth outcomes. Findings underscore the need for careful consideration of growth-adjustment trade-offs in program design. Short-term growth support must be balanced against building external buffers with country-specific circumstances determining appropriate financing modalities.
Keywords:
Budget support; Economic growth; Macroeonomic adjustment; Low-income countries; IMF-supported programs; FX reserves; Crowding-out; Fiscal consolidation; Twin deficit; Current account balance; IMF working papers; growth-reserves trade-off; support in ECFS; financing modality; Government debt management; Monetary unions; Budget planning and preparation; Credit; Global; West Africa
Cover Technical Notes and Manuals
Prudential Capital Requirements for Banks: Buffers and the Pillar 2 Capital Assessment
Ebru Sonbul Iskender
,
Katharine Seal
, and
Ana Carvalho
The Basel capital framework has evolved since the introduction of Pillar 2 in Basel II. Basel III enhanced capital quality and quantity, adding macroprudential buffers such as the capital conservation buffer, the countercyclical capital buffer, and systemic risk buffers for global and domestic systemically important banks to strengthen banking resilience post-global financial crisis. Pillar 2 remains crucial for addressing bank-specific risks and vulnerabilities beyond Pillar 1, relying on supervisory judgment and banks’ internal capital adequacy assessments. Emerging and developing economies should adapt the Basel framework to local contexts, often maintaining higher capital requirements because of macroeconomic volatility and structural weaknesses. In developing the architecture of capital adequacy, jurisdictions need to focus on the appropriate mix and the sequencing of Pillar 2 add-ons and Basel III capital buffers tailored to their specific circumstances. Effective implementation requires strong supervisory powers, good data quality, and a tailored mix of Pillar 2 add-ons and Basel III buffers.
Keywords:
Basel Framework; Pillar 2 capital add-ons; capital buffers; risk-based supervision; emerging market and developing economies; credit cycle; capital requirement; bank capital; establishing capital threshold; capital assessment; Countercyclical capital buffers; Capital adequacy requirements; Basel III; Global systemically important banks; Global
Cover Technical Assistance Reports
Republic of Armenia: Technical Assistance Report-Tax Administration Diagnostic Assessment Tool Performance Assessment Report
International Monetary Fund. Fiscal Affairs Dept.
The IMF conducted a repeat Tax Administration Diagnostic Assessment Tool (TADAT) evaluation of Armenia's tax administration system from May 12 to May 27, 2025. The assessment aimed to establish an updated baseline for tax administration performance, identify areas for potential reform, and evaluate achievements since an assessment in 2016. Key findings highlighted strengths in electronic registration, filing, and payment facilities, and good management of IT and data risks. Areas for development include auditing practices and debt management.
Keywords:
TADAT; Armenia; Tax Administration; Diagnostic.; Imf Caucasus; Fiscal Affairs Department; assessment team; Tax Administration Diagnostic Assessment Tool; tax declaration; Imf publication; Tax administration core functions; Auditing; Tax Administration Diagnostic and Assessment Tool (TADAT); Tax arrears management; Global
Cover Selected Issues Papers
Evaluating Armenia’s Fiscal Framework
Masud Al Taj
,
Nazim Belhocine
,
Vahram Janvelyan
, and
Ervin Prifti
This paper evaluates Armenia’s fiscal framework, focusing on fiscal rule design and implementation. Despite the 2018 reforms strengthening the Armenia’s fiscal rules, limitations persist: rules are somewhat procyclical and complex, ex-post enforcement is not legally binding, coverage is restricted to central government, and operational flexibility is limited. Armenia’s fiscal rules have served the country well, but further improvements could be considered. Drawing on international best practices, the paper recommends upgrading fiscal rules to improve countercyclicality, simplify design, broaden coverage, and strengthen transparency and enforcement. Proposed reforms include consolidating expenditure rules, formalizing escape clauses, expanding coverage, and empowering independent oversight.
Keywords:
Armenia; Expenditure; Fiscal governance; Fiscal policy; Fiscal rules; Medium-term budget frameworks; Public debt; Public financial management (PFM); IMF country; issues paper; IMF staff; consolidating expenditure rule; expenditure rule; Current spending; Middle East; Central Asia; Global
Cover Selected Issues Papers
A Building Block Approach for Introducing a Positive Neutral Countercyclical Capital Buffer in Albania
Maximilian Fandl
,
Giorgia De Nora
, and
Eugena Topi
The paper discusses the introduction of a positive neutral countercyclical capital buffer (CCyB) for Albania. The building blocks present a step-by-step guide to assess preconditions to be in place. Applied to the case of Albania, authors employ a set of methods for the calibration of a positive neutral rate, including a quantile local projection and stress-test based approach. The paper (i) finds a positive neutral CCyB regime is feasible and net beneficial for Albania, (ii) identifies the adequate range of the positive neutral rate between 100-200bps, and (iii) provides a template for emerging markets to explore positive neutral CCyB regimes.
Keywords:
macroprudential policy; countercyclical capital buffer; releasable capital buffer; local projection; stress test; IMF staff; IMF country; issues paper; building block approach; Countercyclical capital buffers; Bank soundness; Capital adequacy requirements; Commercial banks; Stress testing; Systemic risk; Europe
Cover IMF Staff Country Reports
Albania: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper analyzes a building block approach for introducing a positive neutral countercyclical capital buffer (CCyB) in Albania. While Albania has advanced its macroprudential policies, the current regulatory framework includes limited releasable buffers. Introducing a positive neutral CCyB regime would be an important milestone in the development of Albania’s macroprudential toolkit. It would strengthen the Bank of Albania’s ability to react to stress episodes and improve the usability of capital buffers without unduly restricting bank credit provision, while maintaining a higher CCyB through the cycle compared to the existing buffer regime. While high bank profitability could support a fully capital-accretive transition to a positive neutral rate, there are some merits to a partially capital-accretive or a capital-neutral introduction in the Albanian context. The calibration of the positive neutral rate could be based on a suite of backward- and forward-looking methods, combined with expert judgement.
Keywords:
CCyB regime; staff team; CCyB calibration; IMF country; calibration method; Europe
Cover IMF Staff Country Reports
Republic of Armenia: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper evaluates the effectiveness of Armenia’s fiscal framework, with a specific focus on the design and implementation of fiscal rules. Armenia's existing fiscal framework has been effective, but further improvements are necessary to align with international best practices and support the fiscal consolidation outlined in the 2026–28 Medium-Term Expenditure Framework. Key policy recommendations focus on improving the countercyclicality of fiscal rules, such as upgrading the expenditure rule with forecast error adjustments and incorporating structural deficit targets into the balanced budget rule. Simplification is also essential, replacing complex rules with a clearer, more monitorable set, and establishing transparent, well-defined escape clauses to manage economic shocks while preserving discipline. Furthermore, enhancing transparency through legally mandated reporting and consolidating rules in unified legislation is crucial. The framework's coverage should be broadened to include off-budget entities and contingent liabilities. Finally, strengthening enforcement via statutory codification and enhancing institutional oversight, potentially through an independent fiscal council, will bolster the rules' credibility and accountability, supporting Armenia's public finance resilience.
Keywords:
expenditure rule; rule compliance; staff team; IMF country; strength Index; Fiscal rules; Fiscal governance; Current spending; Global; Middle East; Central Asia
Cover IMF Staff Country Reports
Republic of Armenia: 2025 Article IV Consultation, Sixth Review Under the Stand-By Arrangement, Request for Cancellation of the Current Stand-By Arrangement, and Request for a New Stand-By Arrangement-Press Release; Staff Report; and Statement by the Alternate Executive Director for the Republic of Armenia
International Monetary Fund. Middle East and Central Asia Dept.
This paper presents Republic of Armenia’s 2025 Article IV Consultation, Sixth Review under the Stand-by Arrangement, Request for Cancellation of the Current Stand-by Arrangement (SBA), and Request for a New Stand-by Arrangement. The new SBA, which the Armenian authorities intend to treat as precautionary, aims to support continuity in the government’s policy and reform agenda to maintain macroeconomic stability, foster sustainable and inclusive growth, and provide insurance against downside risks. Armenia’s economic performance remains strong. Growth has remained robust and medium-term prospects remain favorable. Inflation is projected to gradually converge to the Central Bank of Armenia’s (CBA) target, and international reserves are expected to remain adequate. The economic outlook remains positive, with steady growth and inflation converging to the CBA’s target. Continued implementation of prudent policies and acceleration of reforms will be critical to further strengthen resilience and secure inclusive and sustainable growth in the period ahead. Structural reforms should be accelerated to raise labor force participation and employment, and support export diversification. Improvements in the investment climate through better governance and strengthening of the legal framework for businesses will support these reforms. Further steps to improve the quality of statistical reporting will help support decision-making.
Keywords:
Ajoint World Bank-IMF mission; Cba governance; IMF TA; exchange restriction; expiration amount; Financial sector stability; Global; Middle East; Central Asia
Cover High-Level Summary Technical Assistance Reports
Armenia: TADAT Assessment
International Monetary Fund. Fiscal Affairs Dept.
The IMF conducted a repeat Tax Administration Diagnostic Assessment Tool (TADAT) evaluation of Armenia's tax administration system from May 12 to May 27, 2025. The assessment aimed to establish an updated baseline for tax administration performance, identify areas for potential reform, and evaluate achievements since an assessment in 2016. Key findings highlighted strengths in electronic registration, filing, and payment facilities, and good management of IT and data risks. Areas for development include auditing practices and debt management.
Keywords:
repeat Tax Administration Diagnostic Assessment Tool; Imf publication; evaluation of Armenia's tax administration system; Tadat methodology; staff of the International Monetary Fund; Tax administration core functions; Tax Administration Diagnostic and Assessment Tool (TADAT); Tax arrears management; Government debt management
Cover Technical Assistance Reports
Republic of Armenia: Technical Assistance Report-Updating the Borrowing Framework for Local Governments
International Monetary Fund. Fiscal Affairs Dept.
The Republic of Armenia is a unitary state with significant financial and decision-making power concentrated at the central government. Over the past two decades, Armenia has evolved from a system of many fragmented municipalities, with low capacity and resources, to a more centralized municipal system with limited local government financial autonomy. Reflecting this, Armenia has a highly centralized budget structure with municipalities accounting for a small share of the general government budget and depend largely on transfers from the central budget. This technical assistance report provides guidance on enhancing the framework for safe and sustainable local government borrowing, including opportunities to strengthen oversight and ensure that decentralized borrowing supports broader fiscal objectives. It identifies opportunities to enhance the institutional and legal underpinnings of subnational borrowing—such as clarifying eligibility criteria, establishing borrowing limits, and integrating municipal debt within the broader public debt framework. The report also highlights the importance of reinforcing public financial management systems and local government capacities to support effective borrowing. Recommended actions include better alignment of budget calendars, stronger fiscal risk monitoring, improved data exchange across ministries, and more regular municipal financial reporting.
Keywords:
Republic of Armenia; Local Government Finance; Municipal Borrowing; Decentralization; Public Financial Management (PFM); Fiscal Risks; Intergovernmental Fiscal Relations; Fiscal Decentralization; Public Debt Management; Local Government Reform; Subnational Debt; Borrowing Framework; Yerevan Municipality; Fiscal Oversight; Capacity Development; Technical Assistance; Imf CCAMTAC; Yerevan Yerevan Municipality; Imf's Fiscal Affairs Department; Imf to International Monetary Fund; Subnational finance