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Armenia Posts Lowest Increase In Pensions In CIS


By Atom Markarian

Despite boasting the fastest economic growth in the former Soviet Union in the first half of this year, Armenia posted the lowest increase in state pensions that now average a meager $10 a month.

Figures released by the CIS inter-state statistics agency show that the retirement benefits paid by the Armenian state have risen by only 3 percent since the beginning of the year.

The highest growth was registered in Russia where the monthly amount of pensions soared by 50 percent to $32. In neighboring Azerbaijan, the average pension current stands at about $28 or 40 percent higher than in December 2001.

Only the impoverished Central Asian state of Tajikistan pays its retirees less than Armenia does.

The situation is similar with the average monthly wages which remain a modest 25,000 drams ($45) in Armenia despite a 13 percent first-half increase. The figure is $130 and $66 in Russia and Azerbaijan respectively.

The real figure is believed to be much higher in Armenia where the private sector, which accounts for over 75 percent of Gross Domestic Product, routinely underreports the amount of wages paid to employees in order to evade payroll and social security taxes. But even that is disproportionately low after eight consecutive years of economic growth.

Armenia's GDP in the first six months of 2002 was up 10 percent compared with the same period last year -- the highest growth rate in the twelve ex-Soviet republics. Economists have blamed the lack of social improvement on the widespread tax evasion and deepening income disparity which prevent a more just distribution of national wealth through greater public spending.

The total amount of various taxes collected by the government last year equaled just over 14 percent of the Armenian GDP. That ratio is three times higher in many developed countries of the West.

Earlier this year, the government moved to introduce mandatory social security accounts for Armenian citizens as a first step towards a radical overhaul of the pension system. An appropriate draft law approved by ministers was touted as an important element in the transition to a new pension system based on the so-called pay-as-you-can principle. According to it, the amount of pensions will depend on workers' life-long social security contributions.

But analysts cautioned that this the type of social security system will be irrelevant to most Armenians as long as their average pensions remain extremely low. The economic program of Prime Minister Andranik Markarian's cabinet, unveiled in 2000, pledges to quadruple benefits by 2008. But with the current rate of pension growth, it will hardly meet the target.
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