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Armenian Government Plans Major Rise In Spending


Armenia - Prime Minister Nikol Pashinian holds a cabinet meeting in Yerevan, September 30, 2021

The Armenian government approved on Thursday the draft state budget for next year calling for significant increases in its expenditures on infrastructure projects, social programs, defense and national security.

Overall public spending is to rise by over 15 percent to almost 2.2 trillion drams ($4.5 billion) in 2022.

The government at the same time pledged to cut the budget deficit through an even sharper rise in its tax revenues.

“The 2022 budget is based on our three main priorities: reforming the national security system, developing infrastructures and modernizing education and science,” Prime Minister Nikol Pashinian said during a cabinet meeting in Yerevan. “We will be paying a great deal of attention to national security, without which it is impossible to achieve long-term development goals.”

Government spending on defense is projected to grow by about 11 percent to 345.4 billion drams ($707 million), reflecting lingering security challenges facing Armenia after last year’s war with Azerbaijan.

The government wants to allocate another 42.6 billion drams to the National Security Service (NSS), a year-on-year increase of about 23 percent. The NSS oversees Armenia’s border guards deployed along some sections of the Armenian-Azerbaijani border after the six-week war.

The draft budget presented by Finance Minister Tigran Khachatrian also calls for a 31.6 percent surge in spending on road construction and other infrastructures which would total nearly 279 billion drams.

Social security would remain the single largest recipient of public funds, with almost 580 billion drams allocated for that purpose.

The spending increases are supposed to be more than offset by a nearly 25 percent jump in state revenue projected at 1.95 trillion drams. The budget deficit would thus fall to 242 billion drams from 334 billion drams recorded last year.

The 2021 deficit, equivalent to 5.5 percent of GDP, was much bigger than expected due to a severe economic recession caused by the coronavirus pandemic and compounded by the war in Nagorno-Karabakh. The Armenian economy shrunk by 7.6 percent, forcing the government to resort to additional external borrowing to make up for a major shortfall in its tax revenues.

The economy returned to growth this year. Pashinian said in July that it is on course to expand by at least 6 percent in 2021.

The recession also pushed up Armenia’s public debt to 63.5 percent of GDP. According to the Ministry of Finance, the debt continued to increase this year, reaching $8.95 billion in August.

Khachatrian expressed confidence that the ongoing economic recovery will allow the government cut the debt-to-GDP ratio to 60.2 percent by the end of 2022.

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