Prime Minister Defends Economic Crisis Strategy

YEREVAN (RFE/RL)–Prime Minister Tigran Sargsyan has insisted that his government can minimize the global economic crisis’s impact on Armenia by implementing large-scale regional projects, “drastically” increasing public spending and providing hundreds of millions of dollars in cheap credit to local businesses.

“This aggressive spending policy by the state will help us neutralize negative consequences [of the crisis] and create jobs,” Sargsyan said in an interview with RFE/RL broadcast on Saturday.

The deepening worldwide recession is being increasingly felt in Armenia where economic growth has slowed down dramatically in the third quarter of this year. Official statistics show its Gross Domestic Product increasing by 7.2 percent in January-November 2008, down from 13 percent recorded in 2007. Economists anticipate an even more modest growth rate next year.

Sargsyan reaffirmed and defended the Armenian government’s strategy of dealing with the crisis which he presented to parliament last month. One of its three key elemen’s is a significant increase in public spending on road and housing construction and other infrastructure projects.

In particular, the government plans to spend $250 million on completing the protracted reconstruction of Armenia’s northern regions devastated by the 1988 earthquake. According to Sargsyan, this alone will create 5,000 more jobs in the unemployment-stricken area.

“Parallel to that, we will drastically increase lending to small and medium-sized businesses,” he said, reiterating government hopes to borrow $250 million from the World Bank and other foreign donors for that purpose.

The government will need much greater foreign funding for several ambitious projects which Sargsyan said will also cushion the effects of the global crisis. Those include construction of a new nuclear plant and a railway connecting Armenia to neighboring Iran. Sargsyan spoke of “very strong interest” in the plant’s construction shown by foreign investors but did not specify potential sources of at least $1 billion needed for putting the project into practice.

The prime minister dismissed reports that the crisis is putting growing downward pressure on the national currency, the dram, and that the Central Bank of Armenia is spending heavily to prop up its value. “We do not intend to artificially interfere in the formation of exchange rates because that is fraught with many negative consequences,” he said.

Sargsyan also insisted that the government is on track to implement an ambitious reform agenda which he unveiled after being appointed prime minister in April. That includes measures to combat widespread tax evasion, improve tax administration and create equal conditions for all businesses.

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