YEREVAN (Reuters)–Armenia’s parliament has adopted a $428 million budget for 1998–with heavy spending on defense that was necessitated by the former Soviet republic’s unresolved territorial conflict with neighboring Azerbaijan–government officials said in a statement released on Monday.
Out of an overall budget passed late on Saturday of 212.4 billion dram–33.3 billion dram are to be spent on defense needs for the land-locked Transcaucasus republic of 3.5 million people.
Social spending is planned at 21.2 billion dram–4.4 billion dram more than in 1997.
A deficit of 50.9 billion dram or 5.5 percent of gross domestic product (GDP)–is to be covered by domestic resources–income from privatization and lending from international financial organizations.
An inflation rate of 13 percent is projected for the year while real GDP growth is seen at 5.2 percent.
"This budget is aimed at development and not needs," the Finance and Economy Minister told parliament after it adopted the budget plan.
Analysts say the Armenian economy will not be able to grow to meet its full potential without resolving its long-standing territorial dispute with Azerbaijan.