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October 14, 2010

Budget 2011: Government-submitted draft draws mixed response

The draft state budget for 2011 that Armenian lawmakers will debate has been receiving conflicting assessments. While the government calls it a budget with a clear social orientation and leading to stabilization of the economy, the opposition strongly criticizes the offered draft.

The 2011 state budget, as presented in its draft version, calls for 999 billion (about $2.77 billion) in spending, which is by some 63 billion drams (about $175 million) more than the current year’s budget allocation. The government says this addition is first of all to be directed at the social sector.

“Not only will the volume of social allocations increase, but also their share in the total budget expenditure patterns. We have envisaged allocations of 24-25 percent from the total expenditure part of the budget for social protection issues, whereas the social-cultural section of the budget expenditure pattern amounts to almost 45 percent,” Finance Minister Tigran Davtyan told media on Wednesday.

Armenian Center for National and International Studies (ACNIS) economist Hovsep Khurshudyan considers it meaningless to comment on the increase of social spending in the government-proposed budget for 2011.

“We know lots of facts when the Audit Chamber has revealed numerous misappropriations of millions of drams from budget funds, which are never returned to the budget. No one is punished for that. Under similar circumstances, it is simply absurd to talk about social spending growing by a certain percent when misappropriations of that scale go on, including in the social sector,” explains Khurshudyan.

Evaluating the 2011 draft budget, Prime Minister Tigran Sargsyan noted that it is consistent with the economic policies adopted by the government. Finance Minister Davtyan says next year is expected to see a GDP growth by more than 4 percent.

The economic policies that the government has adopted for the country to end the economic decline brought on by the effects of the global recession have constantly been criticized by economists.

“Economic growth should be ensured not by increasing a few billion drams in the budget, but through making investment in manufacturing industries. We have seen how this year, at the expense of increasing the external debt, predominantly elite construction has been given loans. Such crediting cannot have any serious strategic importance, but solely maintains the current growth of GDP,” says Khurshudyan.

Economist Ara Nranyan, a lawmaker with the opposition Armenian Revolutionary Federation (Dashnaktsutyun) faction, argues that with its draft budget for 2011 the government “continues a stagnant economic policy.”

“This budget once again proves our argument that the government did not want to use the opportunities held out by the economic crisis to make painful, but drastic reforms that are needed, in other words to change the economic structure and the structure of GDP,” says Nranyan.

By Sara Khojoyan
ArmeniaNow reporter

Direct link: ArmeniaNow.com

The Armenian Center for National and International Studies (ACNIS) is a leading independent strategic research center located in Yerevan, Armenia.  As an independent, objective institution committed to conducting professional policy research and analysis, ACNIS strives to raise the level of public debate and seeks to broaden public engagement in the public policy process, as well as fostering greater and more inclusive public knowledge. Founded in 1994, ACNIS is the institutional initiative of Raffi K. Hovannisian, Armenia’s first Minister of Foreign Affairs.  Over the past fifteen years, ACNIS has acquired a prominent reputation as a primary source of professional independent research and analysis covering a wide range of national and international policy issues.

For further information on the Center call (37410) 52-87-80 or 27-48-18; fax (37410) 52-48-46; email root@acnis.am or info@acnis.am; or visit www.acnis.am.

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