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Government Plans $1 Billion Budget For 2006

By Shakeh Avoyan

The Armenian government approved on Wednesday its draft budget for next year that calls for an almost 20 percent increase in public spending which would pass the $1 billion mark for the first time since Armenia’s independence.

The record-high spending bill, which will be sent to parliament next week, commits the government to collecting 380.3 billion drams ($853 million) in revenues and making 450.2 billion in expenditures in 2005. The National Assembly is expected to pass it without major changes.

The Armenian military would remain the single largest recipient of the still modest public funds. The government wants to increase its budget by 21 percent to 74.3 billion drams ($166 million). The continuing large share of military spending in the national budget reflects Armenia’s unresolved conflict with Azerbaijan over Nagorno-Karabakh.

Armenia’s defense budget increasingly pales in comparison with that of Azerbaijan which is using growing proceeds from oil exports for a military build-up. Azerbaijani President Ilham Aliev pledged recently to double his country’s defense spending to $600 million next year.

The proposed 2005 budget sets side a total of 69 billon drams for Armenia’s education sector and 54 billion drams for social programs. According to Deputy Finance Minister Pavel Safarian, the overall increase in social spending would lead to a sizable rise in public sector salaries and poverty benefits. He said the average monthly salary of school teachers would rise by 16 percent to 58,300 drams ($130).

The government expects to finance most of its budget deficit, projected at $70 billion drams, from domestic sources for the first time since independence. Low-interest loans from the World Bank were until now Armenia’s main source of deficit funding.

Safarian told reporters that the draft budget was drawn up on the assumption that the Armenian economy will grow by at least 7.5 percent in 2005. He said its successful implementation would also require a further improvement in tax collection.

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