Armenian Government Likely To Cut 2009 Spending

govtspendingYEREVAN (RFE/RL)–The Armenian government is unlikely to avoid cutting its expenditures projected for this year despite securing hundreds of millions of dollars in external budgetary loans, a senior official said on Wednesday.

Armenia’s state budget for 2009, approved by parliament late last year, calls for 947 billion drams ($2.6 billion) in expenditures. The government needed to boost its tax revenues by 20 percent in order to meet the record-high target. However, those revenues have fallen substantially this year amid a deepening economic recession resulting from the global credit crunch.

Faced with the tax shortfall, the government last March delayed 131 billion drams in planned spending until the fourth quarter of the year. It has since received more than $1 billion in anti-crisis loans from the International Monetary Fund, the World Bank, the Asian Development Bank as well as Russia. At least one-third of the money is to be used for financing the government’s widening budget deficit.

According to Deputy Finance Minister Vartan Aramian, the government will likely have to cut budgetary spending by about 4 percent despite the large-scale external assistance. “We will not spend 947 billion drams in full,” Aramian told RFE/RL. “In total, almost 911 billion worth of expenditures will be made,” he said.

Other Armenian officials have said that the projected government spending on pensions, poverty benefits, public-sector salaries and other social programs will not be slashed in any case. Both the IMF and the World Bank consider that important for reducing the fallout from the economic crisis.

The tax shortfall also forced the government to push through parliament in May a legal amendment that raised from 5 percent to 7.5 percent the maximum possible ratio of the budget to Gross Domestic Product. Aramian confirmed that the legal limit will be raised further if economic developments follow a worst-case scenario.

“Under our current scenario, the deficit is to make up 6.5 percent [of GDP],” he said. “If a worse scenario comes about, which is not likely but can’t be ruled out, it is possible that our deficit will exceed 7.5 percent.”


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