Budget Talks Continue in National Assembly

YEREVAN (RFE/RL)–Heated debates are expected in the Armenian parliament next month when the government submits its 1999 draft budget–projecting a 30 percent increase from its volume this year but raising questions as to sources of deficit funding.

The spending bill–calling for 312 billion drams ($610 million) in expenditure and 255 billion in revenues–will be sent to the parliament’s economic committee on November 2–which will give its verdict before the draft goes to the National Assembly floor.

Overall–the document maintains existing funding proportions for various areas–with around 30 percent of the money earmarked for so-called "power ministries" (defense–law enforcement) and a total of 20 percent for education and social programs.

The government plans to spend 28 billion drams on construction projects–which are likely to concentrate on the country’s north hit by the 1988 devastating earthquake.

Officials say they will carry on with their declared policy of reducing tax burden on businesses–while expanding tax base. Revenue collection is intended to be boosted by a tougher crackdown on the large-scale shadow economy.

More money could also be collected in the energy sector where prices may be raised by 12.5 percent as soon as next January as is demanded by the World Bank.

However–concerns remain about the government’s ability to cover the budget deficit in 1999–estimated at 57 billion drams–using "non-inflationary sources" as was stressed by Prime Minister Armen Darbinian at a cabinet meeting last week.

This means that the cabinet will continue to rely on external gran’s as the main deficit funding source–as has been the case in the past few years. But with growing talk about a global economic crisis–Western donor-states are increasingly reluctant to give non-refundable money to developing countries like Armenia. For example–instead of the projected $42 million in gran’s for this year’s budget–Yerevan has received a mere $3 million to date. This fact is already forcing the government to ax a number of "investment projects" despite better-than-expected tax collection. Latest media reports speak of mounting wage arrears among public employees.

With debt servicing estimated at $46 million–up from this year’s $33 million–the 1999 budget will come under further strain. Besides–1999 is a year of parliamentary elections in Armenia and the authorities may be tempted to increase social spending to try to ward off a strong opposition showing. Calls for greater government spending are also bound to be heard in parliament as signs of the unfolding election campaign are visible.

All this suggests that Darbinian’s government will have to go great lengths to satisfy major interest groups and at the same time make sure its calculations prove correct.

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