OVERVIEW

Millennium Challenge Account-Armenia (MCA-Armenia), a State Non Commercial Organization established by the Government of Armenia, is responsible for overseeing the transparent implementation of the Compact signed between the Millennium Challenge Corporation (MCC) and the Government of Armenia.

In 2004 the Government of the United States of America announced about the creation of a foundation to provide special financial support to countries in need of assistance to counter the challenges of the Millennium.

In 2005, the MCC Board of Directors (see www.mcc.gov) selected 17 out of 64 beneficiary states as eligible for funding under the Millennium Challenge Account. These countries are: Armenia, Benin, Bolivia, Cape Verde, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Morocco, Mozambique, Nicaragua, Senegal, Sri Lanka, and Vanuatu.

The selection of countries was performed on the basis of a study into all efforts exerted by a state in areas of ruling justly, democratic governance, liberal economy, and prosperity for the people. The Board of Directors of MCC has applied information under 16 criteria (qualitative and quantitative) to assess the economic and political conditions present in a country for promotion of sustainable economic growth.

As a result, Armenia was positively assessed for policies of ruling justly, promotion of economic freedoms, and investment in human capital.

The Board of Directors of the MCC has invited the short-listed countries to prepare project proposal packages for funding from the Millennium Challenge Account. The Board has also defined the basic criteria that will be deemed important in the selection of projects for financial support. These criteria include: (a) impact on economic growth; (b) existence of participatory discussions and consensus on proposed projects; and (c) the Government's commitment to sustaining reforms in policy areas that are deemed important and progress reported as a result of such reforms.

Thus, on March 27, 2006 the Millennium Challenge Corporation signed a five-year, $235.65 million Compact with the Government of Armenia. The Compact is focused on one goal: the reduction of rural poverty through a sustainable increase in the economic performance of the agricultural sector. Armenia plans to achieve this goal through a five-year program of strategic investments in rural roads, irrigation infrastructure and technical and financial assistance to improve the supply of water and to support farmers and agribusinesses. The Program will directly impact approximately 750,000 people, or 75% of the rural population, and is expected to reduce the rural poverty rate and boost annual incomes.
On September 29, 2006 the Compact officially entered into force.

ARMENIA DISBURSEMENT SCHEDULE
(IN MILLIONS)

Disbursement agreement

Rural Road Rehabilitation

The Compact includes a $67 million project to rehabilitate up to 350 kilometers of rural roads. When complete, the road network will ensure that every rural community has road access to markets, services, and the main road network. Under the Compact, the Government of Armenia will be required to commit additional resources for maintenance of the road network.

Improved Irrigation

The Compact also includes a $146 million project to increase the productivity of approximately 250,000 farm households (34% of which are headed by women) through improved water supply, higher yields, higher-value crops, and a more competitive agricultural sector. This project consists of two activities:
An infrastructure activity that aims to increase the amount of land under irrigation by 40% and will improve efficiency by converting from pump to gravity-fed irrigation, reducing water losses and improving drainage; and A water-to-market activity that will improve the efficiency of water delivery to farmers and boost farm productivity and profitability through technical assistance and credit support.
Administrative and monitoring and evaluation costs of the Program are budgeted at approximately $23 million

OBLIGATIONS BY KEY SECTORS
(IN MILLIONS)