By Atom Markarian
The Armenian government approved on Thursday a third modest increase in tiny state pensions this year, which it said was made possible by robust GDP growth and a crackdown on the informal sector of the economy.
The measure raised from 7,600 drams to 8,300 drams ($15) the average amount of monthly retirement benefits paid to some 490,000 elderly Armenians. According to the head of the State Social Insurance Fund, Frunze Musheghian, it will require an extra 4.2 billion drams in social tax revenues which his agency collects from all officially registered companies and their employees.
“If this rate of growth continues, I am convinced that the pensions will be twice increased in the course of next year,” Musheghian told reporters. Their should stand at around 10,000 drams by the end of 2004, he said.
But even that figure will still be below the official minimum “food basket” guaranteeing a person’s physical survival. It is currently worth 12,600 drams.
Under the government’s recently approved poverty reduction program, the average pension in Armenia is projected to reach 26,700 drams by 2015. The extra money should come from a further economic expansion and shrinkage of the huge shadow economy which does not pay any taxes to the state.
Another problem is that the Social Insurance Fund is still owed 40 billion drams ($70 million) by taxpayers across the country. Most of them work for large but financially weak companies.
Musheghian said his fund has already made major progress in identifying shadow sector businesses and forcing their owners and employees to make mandatory retirement contributions worth up to 10 percent of their incomes. He said the number of Armenians paying the regressive social security tax has increased from 265,000 to 410,000 since July 2002.
According to some independent estimates, as many as 750,000 Armenians are employed in the non-agricultural sectors of the economy.