On 21 November, the World Bank’s (WB) Board of Executive Directors approved a new, EUR 45.8 million (US $50 million) loan for the Armenia Governance Development Policy Operation (DPO), reported arka.am. The loan is of fixed spread, with a 14.5-year grace period and a total repayment term of 25.5 years.

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

“This operation prioritizes core governance reforms, the initial steps which set the foundations for longer-term reforms in a number of areas,” said Sylvie Bossoutrot, the 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[s] 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.” She also praised Prime Minister Nikol Pashinyan’s government for raising the salaries of some public sector workers and plans to boost government spending on education and healthcare next year. 

Market competition 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,” said Genevieve Boyreau, World Bank Task Team Leader of the Project. 

The World Bank Country Partnership Framework 2019-2023 for Armenia focuses on three main areas: enabling export and company competitiveness; human capital and development equity; and sustainable management of environmental and natural resources.

In its last Doing Business report, the World Bank ranked Armenia in 47th place, which was a 6 place downturn in comparison to last year’s report (Caucasus Watch reported). According to the report, businesses in Armenia still face challenges obtaining construction permits and resolving insolvency.