The role of international financial institutions In rural development in Armenia

Abstract

After gaining independence (September 21, 1991) Armenia’s economy experienced severe shocks which caused a sharp fall in Gross Domestic Product (GDP), fiscal crisis and hyperinflation. As a result of economic collapse the poverty incidence grew dramatically throughout the country. However, Armenia initiated and implemented political, structural and economic reforms, which prevented a larger decline. Though Armenia’s economy has had a significant growth over the last decade and now Armenia has steadily growing GDP, the population does not have equal social and economic opportunities, since economic growth is not equally enjoyed by entire population of the country. Unfortunately, throughout most of rural Armenia, people continue to live in very poor conditions, often without access to basic services. Indeed the Government of Armenia (GoA) puts a stress on rural and agricultural development and considers this as one of its policy priorities. However public funds are in great shortage and financing for rural development to larger extent still comes from foreign assistance and international loans provided to the GoA. This Master’s Essay aims to examine the current situation and challenges in rural areas, identify the key aspects of development in Armenia that should be considered to improve living standards in rural communities and promote rural development, to review the Government policy in this sector. Further, this paper aims to identify and assess the role of major International Financial Institutions (IFIs) that make investments in Armenia for rural development. The first chapter describes economic situation in Armenia after independence, transition to market economy and impact of reforms since 1991. The second chapter discusses the current situation in rural areas, identifies the key factors that play a strong role in Armenia’s rural economy, and examine the main shortcomings in key rural sectors. The third chapter identifies the major donors that make investments in Armenia for rural development, describes the strategies they adopted, and discusses whether those strategies match with the country’s development needs, and whether the development programs of the major donors have achieved their objectives and had a substantial impact on the rural development during the last 5 years. The final chapter summarizes the findings and provides policy recommendation.