IMF and Armenia reach staff-level agreement on first SBA review; Board to consider in June

International Monetary Fund staff and the Armenian authorities have reached a staff-level agreement on policies for completing the first review of Armenia’s three-year Stand-By Arrangement, the fund said after a March 19–30 mission to Yerevan. The authorities intend to continue treating the program as precautionary.

The agreement is subject to approval by the IMF’s Executive Board, which is scheduled to consider the review in June. If approved, Armenia would gain access to about US$25.3 million (SDR 18.4 million), bringing total access since the arrangement’s inception in December 2025 to about US$50.6 million (SDR 36.8 million).

The mission was led by Alexander Tieman. The IMF said Armenia’s economy remained robust in 2025, with real GDP growth of 7.2 percent, supported by strong consumption and investment. Employment growth was steady, while inflation gradually picked up to 4.3 percent year-on-year in February 2026.

The current account deficit widened to 7.2 percent of GDP in 2025 as domestic demand strengthened and trade flows normalized amid a decline in transit trade. The fiscal deficit came in at 3.7 percent of GDP—lower than budgeted to avoid adding to domestic demand pressures—keeping central government debt at a moderate 47.3 percent of GDP.

The banking system was described as highly profitable with strong capital and liquidity buffers. Growth is expected to remain strong but ease to 5.3 percent in 2026 as domestic demand softens and some trade disruptions from the war in the Middle East materialize, according to the statement.

Inflation is projected to stay elevated in the short run due to higher oil prices and increased logistics costs from trade re-routing, but to return to the Central Bank of Armenia’s target over the medium run.

The IMF cited risks from ongoing uncertainty related to the war in the Middle East—including commodity price volatility, trade disruption, and higher logistics costs—while warning that a slowdown among trading partners and tighter global financial conditions could weigh on Armenia over the medium term.

On the upside, growth could exceed expectations if transport links underpinning the peace declaration are implemented more swiftly. On fiscal policy, the authorities’ upcoming medium-term expenditure framework aims to preserve macro-fiscal stability while meeting development needs.

The 2026 budget deficit target remains appropriate and achievable, the IMF said, accommodating priority spending on social protection, human capital, national security, and infrastructure. Over the medium term, careful expenditure prioritization, tax policy reforms, and strengthened revenue administration are expected to support gradual fiscal consolidation to maintain debt at a moderate level.

The statement welcomed ongoing efforts to reinforce medium-term fiscal planning and called for further improvements in public financial management, including robust fiscal risk management and transparency, and a stronger public investment management framework.

On monetary and financial policy, the IMF said that amid rising inflationary pressures and elevated uncertainty around the outlook, the Central Bank of Armenia should continue to monitor developments and inflation expectations closely and stand ready to raise policy rates as needed to bring inflation back to target.

It added that the flexible exchange rate remains a key shock absorber and that international reserve buffers support resilience to external shocks. The central bank is also continuing to monitor financial sector risks vigilantly and to upgrade its supervisory toolkit and capacity.