Last year saw a collapse of the economic policy implemented in Armenia and actually approved of by influential international banks, including the World Bank (WB). All the economic sectors registered decrease – from 0.1% in the agricultural sector up to 36.4% in the construction sector. As a result, the gross domestic product (GDP), a barometer of economic situation, showed a decrease of as much as 14.4%.

The decrease in tax revenues caused external financing, namely, credits of international banks, to be attracted for the budget gap to be filled. With the previously borrowed funds considered, Armenia’s external debt reached an unprecedented level. As of September 30, 2009, it exceeded U.S. $2.7bn – an increase of U.S. $1,1190m or 77.7% as compared with the corresponding date the previous year. Armenia’s second largest debt after the International Monetary Fund (IMF) (U.S. $823m) is that to the WB (U.S. $545).

WB Regional Director for the South Caucasus Asad Alam, who recently visited Armenia, stated that the WB is elaborating a new assistance strategy for Armenia. According to him, Armenia ranks among the countries that have shown the best program performance indices over the past 10-15 years. The WB renders assistance to Armenia in resolving public health, education, road construction, irrigation channels renovation and social security problems. Armenia is to receive a total of U.S. $550m from 2009 to 2012, with U.S. $100m intended for the country’s state budget, and U.S. $450m for government investment programs.

Lack of irrigation water is one of the grave problems of Armenia’s agricultural sector. Both objective and subjective reasons account for this. At one time, to resolve the problem, the authorities launched a utopian program of using the water reserves of Lake Sevan for irrigating the fields in the Ararat valley. At present, more efficient methods are applied – well water is used for irrigation as well. Dozens of millions of U.S. dollars have been spent on numerous irrigation programs in Armenian rural areas over the years.

In 2009, however, crop production showed a 0.7% decrease instead of an expected increase. It would be absurd to account for this by the global crisis. Armenia is not going to “suffer from an overproduction crisis” due to an extremely low total output per farm.

Rather, the reason is the Government’s poorly developed sector management policy, and other factors, including the lack of water. Or its price, which is quite high for Armenian farmers, who are not at all doing well! In this context, the claims that Armenia is among the countries that have shown the best program performance indices over the past 10-15 years sound as though diplomatic compliments.

All this would seem harmless but for the huge debts that have to be repaid soon.