"2023 was quite successful for Armenia" – Finance Minister’s assessment

Dec 30 2023
  • JAMnews
  • Yerevan

“We will end 2023 with economic growth close to eight percent, although a month ago we forecast growth of about seven percent,” Armenian Finance Minister Vahe Hovhannisyan said.

In financial terms, he assessed last year as “quite successful” for Armenia, as the high economic growth rate of 2022 was maintained. More in taxes were received than planned, but the minister did not say what amount was expected. He said that in 2023, the country saw a significant increase in capital expenditure, which is likely to continue next year.

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It has been reported for a long time that income declaration will be mandatory for residents, and the minister said that everyone who has an employment contract will have to submit a declaration of income. The declaration for 2024 will have to be submitted next year.

“In the near future, an information platform will be launched through which everyone who has to submit a declaration will have the opportunity to do so. There will be a website as well as a mobile app so that people can easily fill out the declaration,” he said.

By launching the system of mandatory declaration, according to Vahe Hovhannisyan, the aim is not to “gather significant financial inflows”. The goal is to obtain information about who receives what type of income, and this “will be useful for policy development and better targeting of assistance programs.”

There will also be an incentive scheme in education, health and housing. Individuals who have completed a declaration will be able, for example, to get back some of the expenditure made in education from the income tax they have paid.

“It will be possible to reduce expenses in the education sphere by 100 thousand drams [about $250] per year, and in healthcare by 50 thousand drams [about $125],” the minister clarified.

Expenditures on programs to support Karabakh refugees will amount to 47.3 billion drams [about $120 million]. This item is included in the state budget for 2024. With this amount, the government will try to solve their most urgent needs. But according to the Finance Minister, it will not be enough to solve all the problems. In addition, it is planned to develop new programs in January and February, and additional funding from the reserve fund will be allocated for these projects.

Financial aid to refugees from Nagorno-Karabakh will lead to a budget deficit of 4.6 percent instead of the originally planned 3.2 percent, says Hovhannisyan. But he immediately explains that this “will not be an additional burden on the state debt.”

“The additional debt burden is not due to these expenses at all, but due to the fact that the government of Nagorno-Karabakh had debts to the banking system of the Republic of Armenia. And a few days ago it was decided that the Armenian government will take over this debt. In this regard, there will be an impact on our debt in the amount of a little more than three percent.”

According to the finance minister, new spending obligations will result from paying this debt:

“In 2024 the budget was approved with a reserve fund of RD$156 billion [about $390 million]. However, the government has already cut 20 billion drams [about $50 million] due to the assumption of Nagorno-Karabakh’s debt.”

Hovhannisyan once again proudly emphasized that this is an unprecedented reserve fund. Presumably it will be used to manage various risks, including in a possible devaluation of the national currency.

Hovhannisyan said that 554 billion drams [about $1.4 billion] will be allocated to the defense sector in 2024, and there is an “annex of priorities” in the draft state budget, where additional needs of the country are outlined.

“If there is an opportunity, we will allocate an amount 200 billion drams [about $500 million] more to the Defense Ministry,” he said.

This would only be possible if additional funds become available.

“And new funds may appear, for example, if tax revenues are oversubscribed or some planned program is not implemented and the money returns to the reserve.”

He notes that there are other areas that may also need funds, such as infrastructure development, social protection and education.