On November 1 the debates on the 2007 state draft budget began in the parliament. The first debate was in the joint sitting of the standing committees with the participation of the President of the National Assembly, the Prime Minister, members of the Government, MPs and representatives of the Central Bank. The Chairman of the NA Standing Committee on Financial-Credit, Budgetary and Economic Affairs Mr. Gagik Minasyan presented the schedule and agenda of the debates.

The Prime Minister of the Republic of Armenia Mr. Andranik Margaryan said that both the 2007 draft budget and the budgets of previous years presented and approved in the Parliament in 2003 are the logical continuation of the program of the activity of the Government. Mr. Andranik Margaryan emphasized, that the “Strategic Program of Poverty Reduction” has served as a main guideline for the Government. Since 2003 the Government is being led by a policy of mid-term projects. The priorities of the 2007 budget are reflected in the mid-term project for 2007-2009 approved in June. As Mr. Andranik Margaryan said, the joint work has given its results – the high growth rates of the economic development are maintained, the social policy is implemented, and the issues proposed by the mid-term and poverty reduction programs have been carried out. The high level of GDP, according to the Prime Minister, has also been achieved as a result of the joint work of legislative and executive bodies, as approving the draft laws presented by the Government during the year, the Parliament has created necessary legislative ground for implementing the budgetary projects. The Prime Minister noted that it’s already the sixth year, that the budget is prepared according to such programs, and with the logic of settlement of urgent problems. He noted, that the 2007 budget will also have a social tendency. This program is that of the coalition and the budget is also prepared by the coalition, says the Mr. Andranik Margaryan. The head of the executive body expressed hope, that as a result of debates and proposals of MPs, they will succeed to create a document, which will provide economic development and security for the country in 2007.

The Minister of Finance and Economy Mr. Vardan Khachatryan presented the main macroeconomic indices at the base of the budget, the sources of revenues and the structure of expenses. According to the document presented by the Government, in the coming year the revenues will be 489.5 billion drams and the expenses will be 557.8 billion drams, consequently the deficit will be 68.3 billion drams. In comparison with the adjusted indicator of the current year the revenues have increased by 12.2 percent. In comparison with 2006 the expenses have increased by 75.6 billion drams. Some branches of social sphere, defense and national security spheres have been distinguished as priority spheres of expense allocation. The executive body considers necessary to pay more attention to the territorial integrity of the country and regional stability, as well as to the balancing of Nagorno Karabakh conflict parties. In order to settle these issues 25% of the budget expenses will be allocated to it. The restoration and development of infrastructures in some economic branches is also among the priority expenses, to which the executive body has assigned 17% of expenses. Social and cultural spheres will be financed by 38.7% of expenses. It is envisaged to increase the average wage of pedagogues in the coming year up to 74 thousand drams. The base salary rate of civil and state servants will be increased by 18%. It is also envisaged to increase the wages of scientific workers and fix their monthly base rate at 50 thousand drams. 1 billion drams is assigned to the compensation of deposits.

In 2007 9% of economic growth, 4% inflation with a possibility of 1.5% fluctuation are expected. The value of one dollar for calculations is fixed at 357 drams. The increase of import of goods is planned to be 13.5%, the increase of export of goods – 16%. According to the Minister, the specific weight of import in the GDP will be 31.7%, that of the export – 20.1%. The GDP-taxes ratio is envisaged to be 15.7%. The Minister noted, that external sources for financing the deficit will dominate – 60.5%. In order to cover the deficit it is planned to use also internal sources, particularly the 8.5 billion drams from the sale of state bonds and 19 billion drams from the privatization activities. According to the Government, the state debt in 2007 will be 1.5 billion drams. The external debt will be more than 1.3 billion drams.

With questions forwarded to the Minister of Finance and Economy, the MPs touched upon issues that the society is anxious about. Head of the People’s Deputy group Mr. Karen Karapetyan expressed his concern about the dollar-dram ratio and the weak value of dollar reflected in the budget. The Minister of Finance and Economy informed, that they envisage a legislative initiative on not including the dollar value in the budget. In answer to the question of Mr. Gagik Minasyan on granting the Commission of Defense of Economic Competitiveness with new powers in order to fight against black economy, the Minister assured, that the work group is preparing this legislative package and it will be soon presented to the Parliament.

The Chairman of the Central Bank, Mr. Tigran Sargsyan presented the assessment of the Central bank regarding the main financial document of the year. Mr. Tigran Sargsyan thinks, that for the portion of taxes in the GDP, the Government has presented a very daring indicator – 15.6%. The Deputy Minister of Finance and Economy Mr. Pavel Safaryan said in his speech later that the program of increasing the taxes-GDP ratio up to 1% is daring, but not unrealizable.

The Chairman of the Central Bank also presented the draft budget of the Central Bank for 2007. 3.3 billion drams are assigned to the maintenance of machinery, which exceeds the amount of the current year by 6.5%. The Chairman of the Central Bank stressed that in 2007 some amounts will be assigned to the department that fights against financing the terrorism and money-laundering, to allowing a credit to a small energy station within the Armenian-German fund, as well as for exercising a unified control. The Central Bank has planned to open a branch in Shushi in 2007.

The budgetary debates will continue on November 3 at the joint sitting of the Standing Committees on Financial-Credit, Budgetary and Economic Affairs and on State and Legal Affairs.