The head of the International Monetary Fund said Tuesday that he backed a 540-million-dollar (426-million-euro) loan to Armenia to help the ex-Soviet republic deal with the global economic crisis. The move came as Armenia's central bank announced that it would cut back its efforts to prop up the country's currency, leading the Armenian dram to lose around 16 percent against the dollar at exchange points in Yerevan.
IMF Managing Director Dominique Strauss-Kahn said in a statement he would "recommend that the IMF executive board approve a request for a 540-million-dollar, 28-month stand-by arrangement" to Armenia. The board of the Washington-based body would discuss the proposal later this week and following approval Armenia would be able to draw 239 million dollars immediately, Strauss-Kahn said.
Meanwhile the Armenian central bank issued a statement saying it would cut back its efforts to support the country's currency. "The council of the central bank, having considered the worsening of trade conditions amid the world financial and economic crisis and the drop in capital inflows, decided to limit central bank interventions on the foreign currency market, thus returning to a free-float policy," it said.
Immediately after the announcement, the dram's value at exchange points in Yerevan dropped from 305-308 drams to the dollar to a range of 350 to 380, reflecting an average drop of around 16 percent. Thousands of people have lost their jobs in the small Caucasus Mountains country, including in its important mining sector, as a result of the global crisis, according to local media. Last week the World Bank said it would grant Armenia 85 million dollars (67 million euros) to ease the effects of the financial crisis.