Prime Minister Presents Draft of First Initiative to Mitigate Economic Impact of Coronavirus

Armenian Prime Minister Nikol Pashinyan has introduced a draft of the first initiative aimed at mitigating the economic impact of the coronavirus on his Facebook page.

“I ask for suggestions and comments to be submitted by March 24 of this year, at 18:00, by sending them to [email protected],” he noted.

1. Objective of the Initiative
The aim of the initiative is to assist individual economic operators in Armenia in mitigating risks associated with anticipated liquidity issues due to the coronavirus.

2. Purpose of Support
The purpose of the assistance is to create an opportunity for economic operators to buy time to respond to changing demand conditions and to make decisions regarding continuing or restructuring their activities to adapt to the altered economic situation.

3. Scope of Economic Operators
For the purposes of this initiative, economic operators include any resident private commercial organization or individual entrepreneur operating within Armenia (excluding banks, credit organizations, pawn shops, and insurance companies) that has engaged in commercial activities in Armenia for at least the past year and has a favorable credit and tax history.

4. Forms of Assistance
4.1. Assistance will be provided to economic operators through co-financing of targeted loans received from all licensed banks or credit organizations operating in Armenia (hereafter referred to as financial institutions), refinancing, and interest rate subsidies. The intended forms of assistance aim to solve the following issues:
– Co-financing: addressing insufficient collateral levels with respect to loans, partially mitigating currency risks, and partially decreasing interest expense.
– Refinancing: completely mitigating currency risks and partially decreasing interest expenses.
– Subsidizing: significantly reducing the interest costs on loans.
4.2. Each economic operator may only qualify for one form of assistance.

5. Purpose of Loans Under Assistance Instruments
The forms of assistance apply to loans aimed at covering the following expenses:
– Salaries or equivalent payments for employees of the economic operator, not exceeding 500,000 AMD per employee per month, for a maximum of three months (hereafter referred to as employee loans).
– Payments of taxes, duties, and mandatory payments to the state or community budget (hereafter referred to as tax loans).
– Purchase or importation of raw materials, provided that the entire volume of raw material is used in Armenia for the production of finished products and the operator possesses the necessary production capacities (hereafter referred to as raw material loans).
– Import of machinery and equipment, provided that the machinery and equipment will be used in Armenia to establish or expand production (hereafter referred to as equipment loans).
– Payments for public services (expenses for electricity, water, gas, and communication services, but not exceeding 5,000,000 AMD per service per month for a maximum of three months; hereafter referred to as utility payment loans).
– Import of food by trade companies, provided that the purchased or imported goods are sold in Armenia (hereafter referred to as food loans).

6. Main Requirements for Loans Provided Under Assistance Instruments
The loans offered under assistance instruments must meet the following requirements:
– Currency: AMD; in the case of co-financing, the portion provided by the financial institution may also be in foreign currency.
– Term: up to 24 months.
– The maximum amount of loans provided to one operator under the assistance instrument must not exceed the equivalent of 500 million AMD, and the maximum amounts for co-financing or refinancing for one operator may not exceed 250 million AMD.
– Disbursement method: only non-cash and bank transfers.
– The maximum integrated interest rate is between 0% and 6% per annum (not exceeding 6%) depending on the rules set for the used assistance instrument.

7. Entities Providing Loans Under Assistance Instruments
7.1. Loans will be provided by all commercial banks and credit organizations operating in Armenia.
7.2. The procedure for applying the assistance instruments will be defined by a joint act of the Central Bank of Armenia and the Ministry of Finance of Armenia.

8. Description of the Content of Assistance Instruments
Any economic operator meeting the conditions set by the guidelines can apply for a loan from a financial institution, which, upon approval, may, at the borrower's request, be executed in accordance with the rules established by this initiative:
– Co-financing of the loan of a certain amount, for the same term, with an interest rate of 0% for the co-financed portion, partially assuming the risk of loan repayment, or
– Refinancing of the loan of a certain amount (in some specific cases set by this initiative, fully), for the same term, with an interest rate of 0% without assuming the repayment risk, or
– Subsidizing the interest of the loan for a certain amount (in some specific cases set by this initiative, fully) for the entire term of the loan without assuming repayment risk.

9. Limitations for Applying Assistance Instruments Based on Loan Purpose
The following limits apply to loan amounts corresponding to the purposes under the assistance instruments:
a) Salaries of employees - co-financing rate: 50%; refinancing rate: 100%; interest subsidy: fully.
b) Taxes, duties, mandatory payments - co-financing rate: 50%; refinancing rate: 100%; interest subsidy: fully.
c) Equipment - co-financing rate: 25%; refinancing rate: 50%; interest subsidy: 5%.
d) Purchase of raw materials - co-financing rate: 40%; refinancing rate: 50%; interest subsidy: 6%.
e) Utility payments - co-financing rate: 45%; refinancing rate: 90%; interest subsidy: 10%.
f) Food imports - co-financing rate: 30%; refinancing rate: 50%; interest subsidy: 8%.
a), b), e) subject to a maximum integrated % of 12% for financial institutions, and loan currency to be in AMD; c), d), f) with a maximum integrated % of 12% in AMD and 9% in foreign currency.