Investments in water and irrigation sectors through international financial institutions: impact on the Armenian economy

Abstract

After the collapse of the former Soviet Union and subsequent economic difficulties in Armenia, water systems management suffered significant setbacks. The overall management of water systems was loose and poorly coordinated, institutions were weak and systems functioned inefficiently. Lack of financial resources and need for institutional reforms in the water sector made the Government of Armenia to seek funds and technical assistance from international financial institutions and donor organizations. Since early 90s different financial institutions were deeply committed helping the Government of Armenia to provide access to clean and reliable water recognizing the significance of water infrastructure to the sustainability of their initiatives to reduce poverty, stimulate economic growth and meet the Millennium Development Goals. The purpose of this paper is to investigate the impact of investments in water and irrigation sectors through international financial institutions on the Armenian economy. At a first step of the studying the current state of the water and irrigation sectors in Armenia the international experience of two European nations (Czech Republic and Poland), which have some similarities with Armenia (transitional economies, comparable size, large number of small communities, etc.) was reviewed. The paper next reviews the impact of the investments through international financial institutions on the health of the population, social and economic development, as well as poverty reduction of the country. The final part of the paper focuses on the specificities of water and irrigation sectors in Armenia, the investments by international financial institutions, summarizes the result of interviews that were conducted with representatives of different IFIs and a government agency and provides a set of recommendations for further improvement of the sectors’ efficiency.