TOL: Awkwardly Successful

Transitions Online, Czech Republic
Nov 15 2004

Awkwardly Successful

by Haroutiun Khachatrian

The government beats its own poverty-reduction target eight years
ahead of schedule. From Eurasianet.

YEREVAN, Armenia–A recent economic survey in Armenia showing a
significant decline in the number of citizens living in poverty has
placed President Robert Kocharian’s administration in a somewhat
awkward position. While Kocharian has been eager to show Armenians
that living standards are improving, the report’s findings could
complicate the Armenian government’s efforts to secure international
aid for poverty-reduction programs.

The annual survey of household incomes by the National Statistical
Service contained a full range of startling statistics. Among the
most surprising: The percentage of Armenians living below the poverty
line fell from 50 percent in 2002 to 42.9 percent in 2003. Similarly,
the number of poorest Armenians–those who earn less than 7,742 drams
(about $15) per month–also took a surprising plunge, from 13.1
percent of the population in 2002 to 7.4 percent in 2003. At the same
time, the survey indicated that the country’s income gap between rich
and poor narrowed slightly.

The statistics reveals that the poverty reduction rate in Armenia far
exceeds the projections that the government outlined in its Poverty
Reduction Strategic Paper (PRSP) released earlier this year. In one
example in the PRSP, officials estimated that that it would take
until 2012 before the “very poor” could be reduced to less than 8
percent of the population. The NSS figures show that this benchmark
has been surpassed a full eight years ahead of the government’s

Given the NSS findings, questions are already being raised about the
accuracy and potential effectiveness of the government’s anti-poverty
blueprint. While officials have been happy to tout the reduction in
poverty, one government minister has already disputed the NSS
findings. Vardan Khachatrian, the finance and economy minister, told
reporters that the results were difficult to trust and too

Some economic experts share Khachatrian’s doubts. “I cannot see the
reasons that could bring about such a drastic change in the
percentage of the population made up by the very poor,” said Ruben
Yeganian, a researcher at Yerevan’s Institute of Economic Problems.
The decrease was particularly improbable for 2003, when Armenia’s
inflation rate soared in response to an increase in foreign grain
prices, Yeganian asserted. That year, bread prices increased by 31
percent between January and December, causing an overall 8.6 percent
increase in the consumer price index, compared with a 2-percent rise
the previous year.

A report published on 18 October by the International Crisis Group
(ICG) echoes Yeganian’s assessment. Its study, entitled “Armenia:
Instability Ahead,” states that while the market reforms of the 1990s
may mean Armenia is now enjoying a relative boom, relatively few
Armenians have seen a vast improvement in living standards. “The
benefits of economic recovery are not equally shared,” the report
found. “There is little sign of poverty decreasing.”

Contradicting the NSS, the ICG report cited statistics that show 55
percent of the population lives in poverty, with wealth concentrated
in Yerevan and in “circles close to the government.” Meanwhile, the
exodus of educated, well-trained workers–one of the main obstacles
to an Armenian economic comeback–continues. Favored labor markets
include Russia, Central Europe, Ukraine, and Turkey, where potential
salaries are higher than the $78 average monthly salary to be had in

The poverty issue has figured prominently in the ongoing power
struggle between Kocharian and opposition political parties. In an
attempt to outflank his critics, Kocharian unveiled a 12-year plan
for fighting poverty in June. Yeganian speculated that the government
may have cast doubt on the NSS findings in order to prevent a
decrease in foreign aid programs. An additional factor feeding
official concerns, Yeganian suggested, is the decrease in value of
the U.S. dollar against the Armenian dram over the last year. As a
result, the incomes of Armenians, when denominated in dollars, appear
to have increased.

The Armenian government counts heavily on international aid to
promote economic stabilization efforts, including anti-poverty
programs. Armenia hopes to receive $100 million for various economic
development schemes in 2004 from the U.S. Millennium Challenge
Account program, aid monies that are contingent on the country’s
record for democratic reform and human rights. Also in support of
Kocharian’s agenda, the World Bank has pledged to deliver $250
million by November 2004 for work on rural schools, infrastructure
and irrigation systems.

Some representatives of the NSS themselves have admitted to being
caught off guard by the survey’s results. Hovik Hohannisian, head of
Food Security Statistics, raised questions about the criteria used to
determine who is “very poor,” saying that the food basket used to
determine purchasing power was actually more like a “bread basket.”

Meanwhile, one of the country’s main creditors, the World Bank, said
it saw no reason to doubt the NSS data, the Bank’s Yerevan
spokesperson, Vigen Sargsian, told Eurasianet. Aside from the World
Bank, the NSS’s data is routinely cited by international
organizations, including the International Monetary Fund. The NSS
also receives advice from representatives of the European Union and
the U.S. Agency for International Development.

From: Emil Lazarian | Ararat NewsPress