Huge amounts of money have been accumulated in the pension funds of Armenia. They do not reach the banking system, but they are not small amounts either. They yield half to the state budget. We are talking about almost 1.5 trillion drams, which is equivalent to more than 4 billion dollars at today’s exchange rate.

By the standards of our economy, this is a huge amount. Any government would dream of having the opportunity to manage such free funds and use them for the implementation of economic as well as infrastructural projects. But what are the current rulers of Armenia doing? Pension funds have become a purse from which they borrow money for the budget. Instead, they should think about directing this opportunity to the implementation of serious economic programs.

In the form of pension funds, we are dealing with large financial resources, which hardly serve the development of the economy. Even if these funds enter the economy through different channels, their economic result is very low. There are almost no direct injections into the economy.

Why is it like that, you have to ask the authorities, who are still unable to create favorable conditions so that those huge sums formed at the expense of the citizens’ pockets and the state budget effectively serve the economy.

At the time, when the cumulative pension system was introduced, the goal was to use these funds for the development of the country, to ensure economic results. Years pass, money increases at a fairly active pace, but their economic result is not noticeable. After the legislative changes implemented last year, the funds were allowed to invest 10 percent of the money in the real economy. Currently, only one such program is known. We are talking about financial participation in the construction of an artificial intelligence and data processing factory in Hrazdan through a syndicated loan with the banking system.

Instead of investing directly in economic programs, most of the money in pension funds is deposited in banks or loaned to the government to finance budget deficits.

As much as the chairman of the Central Bank considers that the money of the funds is spent so efficiently and purposefully, in reality their effectiveness for the economy is extremely low.

“There are more than 1 trillion drams in the accumulated pension funds of Armenia, at least 60 percent of which are invested in the economy of Armenia.

I think that, yes, these funds serve the economy,” the Central Bank President announced recently in the National Assembly.

Indirectly, those sums may enter the economy, but after a significant price increase.

More than 25 percent of the funds of the pension funds are deposited in banks, mainly dram deposits. It is known that the price of dram deposits today reaches 9-10 percent. This means that before entering the economy, that money becomes significantly more expensive in the banking system. And when it enters the economy through loans, the price sometimes reaches 15-18 percent. Then we wonder why loans are so expensive in Armenia. Funds, in turn, make money on that money, banks on themselves.

Instead of becoming expensive loans in banks, these funds could reach the economy in a much cheaper form, if there were necessary funds and channels for this. But these means and infrastructures in Armenia are very weak or do not work efficiently.

One of the reasons is that there are no reliable programs.

“We need real good projects, which will be financed by pension funds with pleasure,” says the President of the Central Bank.

Pension funds may be happy to finance such projects, but where in our country are prospective, and even more so, large projects to be invested in? The construction of the artificial intelligence factory, which “fell from the sky”, was more of a political than an economic project.

The authorities should be asked why there are no “real good projects” in Armenia. They did it in such a way that they do not come close to the existing projects, let alone implement new projects. Who should implement an investment project in a country where investment security is almost zero? They can enter into an agreement with the investor or simply take away the property. In such conditions, it is not the pension funds who want to be, no matter how much free funds they have, they have not eaten their brains with bread to invest in the economy.

And since it is so, the money of the pension funds goes to the bank and becomes an expensive credit instrument. Another part is lent to the government through bonds. No matter how absurd it is, the government, on the one hand, gives the funds from the state budget to the funds, and on the other hand, takes it back with interest through bonds, so that it can finance the same budget deficit.

It is difficult to imagine such an inefficient expenditure of budget funds. But this is what it is.

It turned out that almost 42 percent of pension fund funds are invested in bonds. It is about 1.7 billion dollars.

The main part of that amount, almost 1.5 billion, is invested in government bonds. In other words, a loan was given to the government.

The internal debt of the government, which has increased several times in recent years, has also increased due to these amounts. At the moment, the government owes 1.5 billion dollars to the pension funds.

Almost 1.3 billion dollars of the fund’s funds are invested in the so-called collective investment instrument. This is the real and effective investment. But those funds are not invested in the economies of Armenia, but of other countries. In Armenia, even if there are such investments, they are too few.

HAKOB KOCHARYAN

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