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Armenian Government Plans Spending Cuts In 2017


Armenia - Prime Minister Karen Karapetian holds a cabinet meeting in Yerevan, 29Sep2016.

Armenia - Prime Minister Karen Karapetian holds a cabinet meeting in Yerevan, 29Sep2016.

The Armenian government announced on Thursday plans to cut its budgetary expenditure next year despite continued economic growth anticipated by it.

Prime Minister Karen Karapetian’s cabinet approved and unveiled its draft 2017 budget calling for a total of 1.36 trillion drams ($2.9 billion) in public spending, down by almost 17 billion drams from this year’s spending target.

Chairing a cabinet meeting in Yerevan, Karapetian said, however, that public spending will actually decrease by as much as 100 billion drams ($210 million). He did not explain the apparent discrepancy.

“We envisage a fairly tough budget for 2017,” the recently appointed premier told ministers. “Figures show that.”

Under the budget proposal, the government is to collect 1.21 trillion drams in taxes and other revenue in 2017. The 2016 state budget calls for a state revenue of 1.19 trillion drams, a target which Armenian tax authorities have been struggling to meet.

Karapetian said that budgetary revenue will rise by 70 billion drams, a further indication that tax collection this year will fall short of the target.

The State Revenue Committee (SCR) reported a tax revenue shortfall of almost 9 billion drams in the first half of this year. The SCR’s deputy head, Armen Alaverdian, attributed it to a drop in customs duties collected from imported goods.

Armenian imports shrunk by around 4 percent in January-June, according to the National Statistical Service (NSS). That reflected a continuing fall in multimillion-dollar remittances from Armenians working in Russia, which in turn suppressed consumer spending and retail sales in Armenia.

Both the government and Western lending institutions have forecast that economic growth in the country will slow to roughly 2 percent in 2016 due to spillover effects of a recession in Russia.

The government’s draft budget is based on the assumption that the Armenian economy will expand by 3.2 percent in 2017. The projected budget deficit would be equivalent to about 3 percent of Gross Domestic Product.

Social security will continue to account for the single largest share of government spending. The proposed budget sets aside 409 billion drams ($863 million) for social programs, compared to 210 billion drams allocated to defense and 129 billion drams to education. Another 102 billion drams would be spent on law-enforcement and the judiciary.

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