Armenia’s state budget deficit stretched to a record high level equivalent to roughly 7.4 percent of Gross Domestic Product last year due to a serious shortfall in the government’s tax revenues, Finance Minister Tigran Davtian said on Wednesday.
The reported proportion is just below the maximum level set by Armenian law. The Armenian parliament raised the debt-to-GDP ceiling from 5 percent to 7.5 percent in June to enable the government to make up for the shortfall with additional financial assistance from abroad.
The authorities have used a considerable part of at least $1.3 billion in loans disbursed by multilateral institutions and Russia for financing the widening deficit. The funding has prevented a drastic sequestration of the state budget for 2009 which projected 945 billion drams ($2.5 billion) in government expenditures.
Presenting an annual report on his ministry’s activities to Prime Minister Tigran Sarkisian and fellow cabinet members, Davtian said the government spent only 827 billion drams in 2009. He stressed that the figure does not include budgetary programs financed with foreign loans and grants. He did not specify the expenditure total, though.
Speaking to journalists late last month, the minister estimated total budgetary spending in 2009 at 905 billion drams. Armenian officials have repeatedly emphasized the fact that the government has not cut back on social spending despite a sharp fall in tax revenues resulting from the ongoing economic recession.
According to Davtian, the government’s overall revenues fell by almost 11 percent to 676.4 billion drams in 2009. He said the State Revenue Committee collected 522.4 billion drams in taxes and duties, down by almost 16 percent year on year. The Finance Ministry posted a virtually zero budget deficit in 2008.
The Armenian budget for this year projects a deficit-to-GDP ratio of 6 percent. It also calls for 930 billion drams in government expenditures.