Economic Development and Research Center NGOEconomic Development and Research Center NGOArmenian Budget Analysis ProjectArmenian Budget Analysis Project

The RA State Budget for 2004The RA State Budget for 2004SummarySummary

YerevanYerevanJanuary 2004January 2004

Prepared byGagik Torosyan

The Law “On RA State Budget for 2004” is adopted by RA The Law “On RA State Budget for 2004” is adopted by RA National Assembly on December 25, 2003 with votes 96 for, 6 National Assembly on December 25, 2003 with votes 96 for, 6 against and 0 abstained.against and 0 abstained.

The law entered into force on January 19, 2004 after its The law entered into force on January 19, 2004 after its publication in RA Official Bulletin, No. 4(303). publication in RA Official Bulletin, No. 4(303).

In a contrast to the previous budgets, The Law “On RA State In a contrast to the previous budgets, The Law “On RA State Budget for 2004” does not specify the structure projected tax Budget for 2004” does not specify the structure projected tax revenues by type of main taxes.revenues by type of main taxes.

In a contrast to the previous budget, Law “On RA State Budget In a contrast to the previous budget, Law “On RA State Budget for 2004” does not present the details of education, health and for 2004” does not present the details of education, health and social sectors budgets social sectors budgets

General NotesGeneral Notes

   20022002 20032003 20042004 20052005 20062006

   actualactual projectedprojected forecastsforecasts

Nominal GDPNominal GDP ( (bil. AMDbil. AMD)) 13571357 1537.51537.5 1694.41694.4 18501850 2019.82019.8

Real GDP growthReal GDP growth (%) (%) 12.912.9 1010 77 66 66

Nominal GDPNominal GDP ( (mil. USDmil. USD)) 2366.62366.6 26492649 2875.32875.3 3123.93123.9 3393.53393.5

Inflation Inflation ((averageaverage, %), %) 1.11.1 4.34.3 33 33 33

Exchange RateExchange Rate ( (dram/dollardram/dollar, , averageaverage)) 573.4573.4 580.4580.4 589.3589.3 592.2592.2 595.2595.2

Total State Budget revenues/GDPTotal State Budget revenues/GDP (%)(%) 16.816.8 18.718.7 16.216.2 17.217.2 17.417.4

State budget tax revenues and State budget tax revenues and duties/GDPduties/GDP (%) (%) 14.614.6 14.614.6 15.115.1 15.415.4 15.815.8

Total State budget expendituresTotal State budget expenditures //GDPGDP (%) (%) 19.419.4 21.721.7 18.718.7 19.319.3 19.319.3

State budget deficit/GDPState budget deficit/GDP (%) (%) 2.62.6 3.13.1 2.52.5 2.12.1 1.91.9

Forecasts of the Macroeconomic Environment as per the Forecasts of the Macroeconomic Environment as per the Budget Message for 2004Budget Message for 2004

RA Consolidated Budget for 2004 is RA Consolidated Budget for 2004 is approved as follows:approved as follows:

RevenueRevenue side - 334.7 bil. dramside - 334.7 bil. dram

Expenditure side - 377.6 bil. dramExpenditure side - 377.6 bil. dram

Deficit - 42.9 bil. dramDeficit - 42.9 bil. dram

RA communities budget RA communities budget 23.123.1

State social insurance fund budgetState social insurance fund budget 68.368.3

RA central bank expenditures (estimates)RA central bank expenditures (estimates) 13.213.2

State real estate cadastre committee State real estate cadastre committee expenditures (estimates)expenditures (estimates) 1.51.5

Bil. dramBil. dram

In the Law “On RA State Budget for 2004”, the In the Law “On RA State Budget for 2004”, the National Assembly also approved:National Assembly also approved:

RA State Budget for 2004 is approved as RA State Budget for 2004 is approved as follows:follows:

Revenue side - 274.1 bil. dramRevenue side - 274.1 bil. dram

Expenditure side - 317.0 bil. dramExpenditure side - 317.0 bil. dram

Deficit - 42.9 bil. dramDeficit - 42.9 bil. dram

RA State Budget Revenues and Official RA State Budget Revenues and Official Grants for 2004Grants for 2004

State budget revenues and grantsState budget revenues and grants 274.1274.1

Current revenuesCurrent revenues 262.5262.5

Tax revenuesTax revenues 242.6242.6

State dutyState duty 14.514.5

Non-tax revenuesNon-tax revenues 5.45.4

Revenues from capital transactionsRevenues from capital transactions 0.70.7

of which: from sale of the state owned land of which: from sale of the state owned land parcels located in Yerevan city:parcels located in Yerevan city: 0.30.3

GrantsGrants 10.910.9

Bil. dramBil. dram

Tax Revenues88.51%

Non-Tax Revenues

1.97%

Grants3.98%

State Duty5.29%

Revenues from Capital

Transactions0.26%

Structure of State Budget Revenues and Structure of State Budget Revenues and Official Grants in 2004Official Grants in 2004

Budget Deficit Financing by Sources in 2004 Budget Deficit Financing by Sources in 2004

Deficit financingDeficit financing 42.9142.91

Domestic FinancingDomestic Financing 5.275.27

Government’s securities Government’s securities 5.275.27

T-billsT-bills 5.305.30

Redemption of promissory notesRedemption of promissory notes -0.006-0.006

Redemption of other government billsRedemption of other government bills -0.025-0.025

Other domestic sourcesOther domestic sources 00

External sourcesExternal sources 37.6537.65

Disbursement of LoansDisbursement of Loans 45.6545.65

Amortization of loans -8.0

Bil. dramBil. dram

The RA State Budget Total Expenditures for The RA State Budget Total Expenditures for 2004 is 317.04 billion dram, of which2004 is 317.04 billion dram, of which

Current expendituresCurrent expenditures 244.12244.12

WagesWages 22.7922.79

Interest paymentsInterest payments 13.2313.23

SubsidiesSubsidies 14.0914.09

Current transfersCurrent transfers 49.8349.83

Expenditures on purchase of goods and Expenditures on purchase of goods and servicesservices

144.17144.17

Capital expendituresCapital expenditures 61.6061.60

Net lendingNet lending 11.3111.31

Bil. dramBil. dram

Salaries and wages9.34%

Interest payments5.42%

Subsidies5.77%

Current transfers20.41%

Expenditures on purchase of goods and

services59.06%

Structure of Current Expenditures of State Structure of Current Expenditures of State BudgetBudget

Total expendituresTotal expenditures 317.04 317.04

100.0%100.0%

Social-cultural sectorSocial-cultural sector 111.72111.72 35.2%35.2%

Defense, public order and national Defense, public order and national securitysecurity

74.70 74.70 23.6%23.6%

Economic sectorsEconomic sectors 67.47 67.47

21.3%21.3%

State debt serviceState debt service 13.23 13.23

4.2%4.2%

Foreign economic activity and Foreign economic activity and assistanceassistance

17.43 17.43 5.5%5.5%

Reserve fundReserve fund 3.62 3.62

1.1%1.1%

Dotation to communitiesDotation to communities 10.70 10.70

3.4%3.4%

State Budget Expenditures by Sectors in 2004 State Budget Expenditures by Sectors in 2004

Bil. dramBil. dram

State Budget Financing of Education and ScienceState Budget Financing of Education and Science

20042004 Change against 2003 Change against 2003 BudgetBudget

Bil. dramBil. dram PercentPercent Bil. dramBil. dram

TotalTotal 42.06 42.06 20%20% 7.15 7.15

Public administration in the education Public administration in the education and science sectorand science sector 0.19 0.19 60%60% 0.07 0.07

Elementary, primary and secondary Elementary, primary and secondary educationeducation 29.22 29.22 27%27% 6.20 6.20

General specialized educationGeneral specialized education 2.43 2.43 21%21% 0.41 0.41

Out-of-school educationOut-of-school education 0.71 0.71 5%5% 0.03 0.03

Preliminary professional Preliminary professional ((vocationalvocational) ) educationeducation 0.36 0.36 16%16% 0.05 0.05

Professional educationProfessional education 1.21 1.21 4%4% 0.05 0.05

Higher and post-higher professional Higher and post-higher professional educationeducation 3.89 3.89 -3%-3% (0.12)(0.12)

Additional educationAdditional education 0.73 0.73 15%15% 0.10 0.10

ScienceScience 3.32 3.32 12%12% 0.36 0.36

20042004 Change against 2003 Change against 2003 BudgetBudget

Bil. dramBil. dram PercentPercent Bil. dramBil. dram

TotalTotal 25.01 25.01 19%19% 4.00 4.00

Public administration in the health sectorPublic administration in the health sector 0.50 0.50 116%116% 0.27 0.27

Hospital healthcareHospital healthcare 12.92 12.92 11%11% 1.30 1.30

Primary healthcare Primary healthcare 8.72 8.72 24%24% 1.70 1.70

Sanitary – anti-epidemic servicesSanitary – anti-epidemic services 1.00 1.00 71%71% 0.42 0.42

Other healthcare services and programsOther healthcare services and programs 1.87 1.87 21%21% 0.32 0.32

Health Sector Financing from State BudgetHealth Sector Financing from State Budget

Social Insurance and Social Security Sector Financing Social Insurance and Social Security Sector Financing from State Budgetfrom State Budget

20042004 Change against 2003 Change against 2003 BudgetBudget

Bil. DramBil. Dram PercentPercent Bil. DramBil. Dram

TotalTotal 36.45 36.45 18%18% 5.63 5.63

Public administration in social Public administration in social insurance and social security sectorinsurance and social security sector 0.65 0.65 81%81%

0.29 0.29

Pensions from the state budgetPensions from the state budget 13.52 13.52 17%17% 1.99 1.99

State allowancesState allowances 17.01 17.01 25%25% 3.38 3.38

Social insurance measures Social insurance measures 2.522.52 16% 16% 0.350.35

Other social programsOther social programs 2.75 2.75 -12%-12%

(0.38)(0.38)

   Change against 2003 Change against 2003

BudgetBudget

((bil. drambil. dram))

2004 2004 Annual Annual

Plan Plan

((bil. drambil. dram) )

State allowancesState allowances 3.38 3.38 17.01 17.01

Foreign economic assistanceForeign economic assistance 4.00 4.00 11.12 11.12

DefenseDefense 5.30 5.30 49.63 49.63

Elementary, primary and secondary Elementary, primary and secondary educationeducation 6.20 6.20 29.22 29.22

Programs for which the 2004 budget will allocate at Programs for which the 2004 budget will allocate at least 2.5 billion dram more as compared to the 2003 least 2.5 billion dram more as compared to the 2003 budgetbudget

  Change against 2003 Change against 2003

BudgetBudget

(bil. dram)(bil. dram)

2004 2004 Annual Annual

Plan Plan

((bil. drambil. dram))

HousingHousing (14.56)(14.56) 2.24 2.24

Water supply and sewerage systemWater supply and sewerage system (2.95)(2.95) 11.10 11.10

Fish breeding and water managementFish breeding and water management (2.64)(2.64) 2.21 2.21

Road managementRoad management (19.46)(19.46) 14.88 14.88

ArtArt (7.50)(7.50) 1.20 1.20

Other expenditure programs not Other expenditure programs not classified in the main groupclassified in the main group

(13.06)(13.06) 6.196.19

Programs for which the 2004 budget will allocate at Programs for which the 2004 budget will allocate at least 2.5 billion dram less as compared to the 2003 least 2.5 billion dram less as compared to the 2003 budgetbudget

About EDRC

Economic Development and Research Center is a non-profit and politically unaffiliated organization established in 2001 in Yerevan, Armenia. It is dedicated to addressing the economic and social challenges that Armenia faces. The mission of EDRC is to promote economic and social development, to influence policymaking and to raise public awareness of economic, social and demographic issues. EDRC focuses on supporting economic freedom and democracy as decisive conditions for the successful development of the Armenia economy. Believing that the future growth of Armenia requires transparent processes in government and society, EDRC promotes these ideas as well as fosters mutual understanding between countries.

EDRC believes that poverty is one of the main obstacles on the way of successful and sustainable growth in Armenia and this the reason why EDRC is actively engaged in the development of poverty reduction national strategy. One of the recent accomplishments of EDRC in this area its ,,Policy Choice for Poverty Reduction,, (PCPR) project, which aimed at assisting Armenian authorities and Civil Society through developments of policy recommendations for poverty reduction. The project was supported pored by Oxfam GB and served as a contribution of EDRC and Oxfam GB in development of PRSP on Armenia. Within the framework of PCPR ,,Growth with Equity ,, research paper was published in May 2002, where the main findings of EDRC in pro-poor growth targeting and policy-making were presented. The contribution of EDRC is also recognized in the use of its economic forecasting models in the PRSP draft. In particular two models of EDRC were presented:, MAGMA,, (Macroeconomic Adjustment and Growth Model for Armenia) for medium and long-term forecasts of macroeconomic indicators, which allows to assess the impact of various scenarios of economic growth; and “Growth and Distribution Model “ for assessment of impact of various policies on income distribution and on the incidence poverty.

“Armenian Budget Analysis” Project

With cooperation of Oxfam GB and DFID, EDRC is implementing “Armenian Budget Analysis” Project (ABA Project).

The objective of ABA Project is the assessment of the Central and Local Government's fiscal activities in order to evaluate their consistency with the main logic of poverty reduction general strategy. Budgets are being tested to identify the current degree of authority’s pro-poor policies.

The outcome of the Project is a set of analytical and informational materials, prepared by EDRC, which serve as guides for large groups of population in their better and more comprehensive understandings of current policies of the state and communities. These materials include also professional analysis of budget and policies. In the scope of the project seminars, roundtables and workshops are organized. The implementation of the project will promote emergence of public demand for adequate social and economic policies, and enhance larger public participation in policy development process.

“Economic Development and Research Center” NGO,Address: Str. Mamikonyants 48, Building I, Yerevan Republic

of Amenia

Telephone: (3741) 23 44 20Telephone: (3741) 23 44 20 (3741) 54 02 89(3741) 54 02 89

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