PARLIAMENT PASSES THE 2004 STATE BUDGET

UNCLAS YEREVAN 003079

SIPDIS

E.O. 12958: N/A
TAGS: ECON AM
SUBJECT: PARLIAMENT PASSES THE 2004 STATE BUDGET


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BUDGET PASSED IN THE FINAL DAYS OF THE YEAR
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1. The National Assembly passed the final 2004 State
Budget during a December 25 extraordinary session.
Following rigorous parliamentary lobbying that resulted
in AMD 5.5 billion (USD 9.8 million) in additional
spending over the initial draft, the budget passed by a
vote of ninety-six to six (with no abstentions). At
the same time, the National Assembly also passed a
package of tax law amendments that the IMF had pushed
to combat tax evasion.

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GOVERNMENT TAKES ON PROPOSALS FROM COALITION PARTNERS
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2. Prime Minister Andranik Markarian noted that this
budget differs from ones passed in previous years
because it incorporates proposals both from the
government and from the coalition partners. (NOTE:
Various parliamentary factions submitted an additional
214 budgetary proposals, of which the government
adopted 117 during the course of budget negotiations.
END NOTE.) According to the Minister of Finance and
Economy Vardan Khachatrian, the additional expenditures
will be directed mainly to social and cultural
programs, education and health care, and social welfare
transfers were pegged to the economy's growth rate.
The Orinats Yerkir Party, parliament's second largest
faction, had been critical of the initial spending
allocations and of the changes in tax law associated
with them. Including the additional spending
provisions in the final version of the budget, however,
ultimately softened their position.

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PRELIMINARY NUMBERS
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3. In the final version of the 2004 budget state
expenditures are projected at AMD 317 billion (USD 564
million),down from AMD 334.2 billion last year. The
budget projects revenues at AMD 274.1 billion (USD 488
million),anticipating a 7 percent growth rate, 3
percent annual inflation and a 16 percent increase in
tax revenues (on top of growth),all realistic
assumptions. The budget thus projects a deficit of AMD
42.9 billion (USD 7 million) or 2.5 percent of GDP, 90
percent of which will be financed by World Bank loans
and soft credits from foreign states. Armenia's total
debt is projected at AMD 1,180 billion (USD 2 billion),
or 69 percent of projected GDP.

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BUDGET LINKED TO GOAM PRSP
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4. Armenian Prime Minister Andranik Markarian said
that the 2004 budget was based on concrete strategic
development programs, by which he is likely referring
to the Poverty Reduction Strategy Program (PRSP). As
outlined in the strategy, the government anticipates
greater tax revenues and plans to spend more on
education, health care and social programs next year,
despite an overall drop in expenditures.
WALKER