Better Policies. Better Future.

Group of experts warns of financial crisis in Armenia

February 19, 2012

WASHINGTON - Policy Forum Armenia (PFA) announces the publication of a Special Report on "Armenia: Averting an Economic Catastrophe."

The Report is the loudest warning to date issued to people of Armenia, the Diaspora, and other stakeholders about the economic disaster in the making in the country. Its objective is to provide an assessment of policies that have driven Armenia to where it is now and point out the signs of more trouble to come.

The report warns that unless drastic changes in the economic policy direction and political-economy landscape are carried out, within the next 3 years, Armenia will be forced to undergo a large and painful devaluation of its currency, the dram, and/or an external sovereign debt restructuring or default.

The Report states that: "The country's political leadership needs to fully internalize these problems and related risks and address them expeditiously. So far it appears that the lessons of 2009 have largely been wasted and no significant change in policy direction was pursued, which may have better prepared Armenia for what is likely to come next. Instead, the elements of the same crony capitalist practices-where a select few have used their disproportionate access to power and influence over economic decision-making for their personal gain-have been reinforced, at the expense of growth, public health, education, and national security. This is not only immoral but in many ways also illegal and needs to change. Armenia's window of opportunity to build a viable economy and address its severe social and demographic problems is closing rapidly."

The Report offers a detailed set of recommendations to help overcome the severe short- and medium-term problems faced by the economy. Important among them is the formation of a legitimate authority to oversee the new policy course on behalf of the people of Armenia. The report states that the situation requires a true government of national unity that would lay out a workable agenda and reach out to all constructive forces in Armenia and the Diaspora to help accomplish that. These efforts would require adequate professional skills but also the support of a truly national and clean political leadership to be successful.

This report is a joint product of a team of PFA members and outside experts. The views expressed in the report do not necessarily represent those of every PFA member. Neither the authors nor the reviewers of this report have received any compensation for their contributions.

Policy Forum Armenia is an independent professional non-profit association aimed at strengthening discourse on Armenia's economic development and national security and through that helping to shape public policy in Armenia. This and other PFA reports, which provide assessments of critical developments taking place in Armenia and the Diaspora, are available at www.pf-armenia.org/reports.