The global economic crisis has, in a sense, played a positive role in exposing the weak points of the Armenian economy, RA Prime Minister Tigran Sargsyan stated in
Parliament, presenting the 2010 draft budget.

“First, the crisis revealed a low level of economic diversification in Armenia, deficit of long-term funds and of relevant institutions. Secondly, oligarchic monopolies and a low competition level in the Armenian economy, which reduces the price flexibility level. Thirdly, poor motivating factors in government agencies. Fourthly, pressing grave problems in the education and health systems. The Government’s 2010 strategy is aimed at resolving these problems,” the Premier said.

Presenting the key performance indicators set by the 2010 draft budget, the Premier tried to answer the question as to why the Government fails to make realistic economic forecasts for 2009-2010. “The answer is a simple one: the global economic crisis breaks all the laws and does not allow accurate forecasts to be made.” He reported that next year Armenia is to receive funds from the Millennium Challenge Corporation, which will allow the country to keep to the 2010 expenditure budget. According to him, the expected economic growth is 1.2%. “We also plan to maintain social expenditures at the 2009 level, and I am sure we will accomplish the task,” he said. The Premier pointed out that the GDP may be a little lower next year as compared with this year.

The Premier also addressed the issue Armenia’s national debt. The public is concerned over whether the country will be able to pay off the debt after receiving loans. “I would like to note that Armenia’s budget deficit is mainly financed by international donor organizations, which prevents market risks. Moreover, the credits issued to Armenia by the World Bank, Asian Bank and International Monetary Fund (IMF) will be restructured, which will relieve the debt burden on the budget. Armenia is not running great risk – if the world economic recovery is delayed, Armenia will postpone the payment of its debts as well.”

The 2010 budgeted expenditures are 533bn AMD instead of the previously forecast 500bn. The target will be exceeded provided a favorable economic situation develops. Otherwise, the expenditure budget will be executed due to the reserve funds. Next year, the financing of local government will total 32.5bn AMD – an increase of 17% as compared with this year. A total of 31bn AMD are intended for the Nagorno-Karabakh Republic (NKR). According to the Premier, the funds will help the NKR ensure its security. Next year the RA Government will continue assisting small & medium-size (SME) and backbone enterprises, create favorable conditions for export and continue customs and tax reforms.

“The Government has focused its attention on reforms in the pension and insurance systems, which will enhance Armenia’s economic diversification,” the Premier said. The Government also plans reforms in the state government, health and education systems.