By Atom MarkarianThe Armenian government approved on Thursday its draft budget for next year which calls for an almost 12 percent increase in its aggregate expenditures through further improvements in tax collection.
The bill, which is due to be sent to parliament before the November 1 legal deadline, projects 372.7 billion drams ($662 million) in expenditures, including subsidies to local governments, and 330.3 billion drams in revenues.
The resulting deficit would make up a record-low 2.5 percent of Armenia’s forecast Gross Domestic Product. The government anticipates that the bulk of the gap, roughly $80 million, will be financed by Western donor organizations and governments as has been the case in the past several years. It hopes that $60 million of it will be fresh low-interest loans from the World Bank.
The draft budget is based on expectations of continued robust economic growth which officials say will equal at least 7 percent in 2004. Official statistics show the Armenian growth hitting an all-time high of 15 percent in the first nine months of 2003.
Presenting the draft to reporters, Deputy Minister of Finance and Economy Pavel Safarian said the favorable macroeconomic environment should bring 256 billion drams in tax revenues, or 16 percent more than this year. He said improved tax collection will enable the authorities to significantly boost spending on education and health care.
The two chronically underfunded sectors are to get an extra 7.5 billion and 4.5 billion drams respectively. That will translate into pay increases for their employees. The Ministry of Education, for example, plans to raise the average monthly wage of school teachers from the current 18,000 to 30,600 drams ($54).
The basic budget targets seem to have won the crucial endorsement of the International Monetary Fund which announced earlier this month that Armenia will likely receive the fifth $13 million installment of the fund’s $95 million Poverty Reduction and Growth Facility (PRGF) loan in November.
Speaking to RFE/RL several days before the announcement, the IMF resident representative in Yerevan, James McHugh, stressed that the 2004 Armenian budget should be “prudent and careful.” “What we are discussing at the moment is the issue of what happens if certain moneys that they are expecting do not materialize,” he said of the IMF’s talks with Armenian officials.