On November 15 the NA Standing Committees began discussions on “2005 Draft State Budget of the Republic of Armenia.” Gagik Minasyan, Chairman of the NA Standing Committee on Financial-Credit, Budgetary and Economic Affairs, announcing the beginning of the parliamentary hearings on budget, presented the hearings agenda. MPs were introduced into the state policy in tax-budgetary sphere, main macroeconomic indices for the coming year, expenditure and revenue items of the draft budget as well as Central Bank’s resolution on the draft budget. The legislators will have an opportunity to take sphere-by-sphere more detailed review of the expenditure item of the draft during one-week discussions.

RA Prime Minister Andranik Margaryan submitted to the Parliament the priorities stipulated in the main financial document.The draft budget does not considerably differ from the FY2004 state budget as far as its strategy, logics and ideology are concerned, the Prime Minister said. Poverty Reduction Strategy Paper and Medium-Term Expenditure Programme 2005-2007 lay at the basis of the draft budget, which was true of 2003 and 2004 state budgets. The government-adopted economic policy will seek to ensure high level of tax collection and is expected to ensure a 118.7% rise against last year’s indices, the PM said. Meanwhile, the executive power aims to ensure tax revenues not through the rise in tax rates but through economic development, rise in GDP, improving the administration of the tax system. PM pointed to the deficit-reduction trend stressing that it will decrease by 3.3bn ADM in 2005 amounting to 47.5bn ADM. The government seeks to forgo the practice of covering the deficit at the expense of foreign financing, he stressed. Stating that 2005 state budget will be socially oriented RA PM presented the events and expenditures of the sphere. As such, the social sphere allocations will total 565.4bn ADM, which represents a 9bn ADM rise against 2004 index. Teachers’ average salary will be raised to 50,551 ADM. Pensions will be raised by 1,000 ADM. Meanwhile, no raise in civil servant salaries will be registered next year.

RA Minister of Finance and Economy Vardan Khachatryan presented proportions and figures of draft budget. Expenditure is set at 375.4bn ADM, which represents a 46.3bn ADM rise against last year’s indices. The social expenditure share of the expenditure item amounts to 35.9%. Allocations to the health care sphere will amount to 32.3bn ADM, 55.3bn ADM to the educational sphere, 4bn ADM will be allocated to science development. The revenue item will amount to 327.9bn ADM registering a 16.2% rise against 2004, the minister said. This item doesn’t include possible financing in terms of the “Millennium Challenges” Program and Lincy Foundation. Official transfers from foreign states and international organization are expected to among to 10bn ADM. The minister presented the following picture of the economic indices: 8% rise in GDP, 3% inflation, ADM-US dollar average exchange rate: 535 ADM. These indices are the results of calculations and not forecasts, Mr. Khachatryan stressed. Over the past 5 years the government managed to double the GDP level, which is the best index of development, he assessed. The exports will increase by 9.4% while the average import annual growth will amount to 7.6%.

According to the discussed document, foreign state debt won’t surpass .172bn. The draft budget won’t bear the burden of the internal debt and will allocate funds to covering expenditure. Touching upon the Poverty Reduction Strategy Paper the minister said that rapid economic growth had a positive impact on the poverty reduction rate and the poverty will reduce to 40% already in 2005.

RA Central Bank Chairman Tigran Sargsyan presented CB’s resolution on the 2005 draft budget. CB proposes that the draft budget estimate inflation within 3% rather than up to 3%. Central Bank stressed the importance of improving tax and customs administration, refining the methods of calculations as well as maintaining quarterly proportions while fulfilling the budget drawing the attention of the government to the aforementioned issues.

The CB Chairman also briefed on the CB expenditure for 2005. Staff maintenance expenditure will amount to 2.6 bn ADM the majority of which will be allocated to the salary payments, Mr. Sargsyan said. When calculating salary payment the CB abided by 302,000 ADM average rate employed in banking sphere.This rate will help prevent the outflow of qualified specialists to commercial banks, the CB chairman said. The government is of the opinion that the CB should present a detailed review of its expenditure as well as a ceiling for the CB expenditure should be imposed, RA Deputy Minister of Finance and Economy Pavel Safaryan.

On November 16 the discussions will be continued at joint meetings of the NA Standing Committees on Financial-Credit, Budgetary and Economic Affairs and State and Legal Affairs and the NA Standing Committees on Financial-Credit, Budgetary and Economic Affairs and Foreign Relations.