Parliament Approves Government Budget Plan

YEREVAN (RFE/RL)–The Armenian parliament overwhelmingly endorsed on Saturday a package of austerity measures aimed at combating a higher-than-projected budget deficit which has put the recently formed government of Prime Minister Vazgen Sargsyan in a difficult financial situation.

The move paves the way for the disbursement of fresh loans from Western lending institutions which are vital for maintaining a relative macroeconomic stability in Armenia.

A shortfall in budget revenues and urgent need to repay a huge public debt to the energy sector have meant an extra spending gap of 31 billion drams ($58 million). This is more than half of the deficit projected for this year.

The budget crisis has led to the freezing of some $55 million in new loans from the World Bank and International Monetary Fund which Yerevan hoped to receive last June. Sargsyan told the National Assembly–controlled by his Unity bloc–that the loans will not be released unless his cabinet balances the budget.

In the most significant step–the Sargsyan government wants to divert more than 17 billion drams in budget funds to the partial repayment of state enterprises’ debts to power stations and distributing companies. A corresponding amount of other planned expenditures will have to be cut as a result.

The accumulating consumer debt threatens to disrupt the work of the energy sector – a key component of the Armenian economy. An IMF official in Yerevan said earlier that "restoring the "financial viability" of the sector is one of the IMF’s key requiremen’s.

The government last month raised excise duties on cigarettes and gasoline in a bid to offset the revenue shortfall worth 13.5 billion drams.

"These are painful but right steps. The international financial organizations won’t give us loans unless we take these steps," Sargsyan told lawmakers. Analysts say the money will not be made available earlier than late September. The Armenian premier said Yerevan and the Western lenders have "reached agreement on all principal issues" and "there are now no major differences" between them.

He said his government opposed the IMF’s deman’s to raise electricity fees and make even more spending cuts.

Some 96 of the 131 members of the Armenian parliament voted for the austerity package. Most of the opposition deputies refused to back the budget changes criticizing successive Armenian governmen’s for failure to come up with correct budget estimates. Seyran Avakian–a deputy from the opposition National Democratic Union–said he does not believe in the government’s ability to meet the new targets.

The parliament majority mainly represents Unity–co-headed by Sargsyan and Karen Demirchian–Armenia’s Soviet-era leader and currently parliament speaker. The bloc swept to a landslide victory in the May 30 parliamentary elections largely owing to Demirchian’s populist charisma.

But the first steps of the new Unity-led cabinet–appointed in June–indicated that there will be no major shifts from the hitherto pursued policy of economic liberalization agreed with the IMF and World Bank.

President Robert Kocharian was not present at Saturday’s emergency session of parliament. Sargsyan repeated his pledge of a tougher crackdown on the shadow economy and more efficient governance.

The Armenian economy grew 4.5 percent in the first half of the year under a 4 percent consumer price inflation–according to the official statistical information. But economists say higher growth rates are need for a rapid economic improvement in Armenia that saw a drastic decline in living standards following the collapse of the Soviet Union.


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