The Armenian government pushed through the parliament on Thursday its draft state budget for next year that aims to maintain fiscal austerity while increasing public spending by roughly 10 percent.
The budget passed by the National Assembly commits the government to spending 1.24 trillion drams ($3.2 billion), up from 1.15 trillion drams projected for this year. Budgetary revenues would similarly rise by around 10 percent to almost 1.15 trillion drams. The resulting budget deficit is projected to be equivalent to less than 3 percent of Gross Domestic Product.
The budgetary targets are based on the assumption that the Armenian economy will grow by more than 5 percent in 2014. The International Monetary Fund and other multilateral lending institutions expect slower growth.
The targets underwent few changes during parliamentary debates, with the government rejecting 90 percent of over 300 amendments proposed by lawmakers.
The spending bill was backed by 70 deputies of the 131-member assembly, virtually all of them affiliated with the ruling Republican Party of Armenia and its junior coalition partner, Orinats Yerkir. Forty other deputies voted against it. They represent the Prosperous Armenia Party (BHK) of Gagik Tsarukian and the three opposition parties holding parliament seats.
Members of the parliamentary minority strongly criticized the proposed budget and the government’s overall economic policy during the debates. Prime Minister Tigran Sarkisian defended his cabinet’s track record.
Sarkisian also defended the budget in his earlier statements, saying that the bulk of the extra spending envisaged by the government will be channeled into social security, education and healthcare. This will mean increases in pensions and salaries of military and security personnel and civil servants.
Improved tax collection will be essential for the planned pay rises. Addressing lawmakers in late October, Sarkisian said that the government will not seek to ensure the sizable revenue increase through a further toughening of tax administration. He said tax authorities will instead focus on “risky” sectors of the economy where they think tax evasion is particularly widespread. This will be done through more frequent tax audits of companies suspected of grossly underreporting their earnings, he added.