Armenia: illusiveness of financial resources’ sources

Susanna Petrosyan, Yerevan. Exclusively to Vestnik Kavkaza

After the dismissal of the government and the appointment of new ministers, Armenia has entered a period of concrete actions which must rely on real financial resources. The government is faced with a lack of financial resources and a need to find sources of them. Three financial sources should be considered in this case: internal resources, foreign loans and investments.

Speaking about the first source, as a result of Tigran Sarkisyan’s policy aimed at protecting the interests of monopolies and oligopolies and the absence of equal conditions for competition, small and middle-sized business was almost destroyed. The authorities are trying to fill the gap that appeared by increasing prices, for example the upcoming rise in electricity power prices, or by launching hidden forms of taxes, for instance the defined contribution pension system.

The West has significantly reduced loans in the last 2-3 years. Mostly small loans ($30-50 million) are being allocated, directed at realization of local programs on development of the management system, agriculture, and so on. The reason for such behavior of the West could be the huge foreign debt of Armenia – more than $4 billion, as well as breaking promises on fulfillment of certain reforms by the Armenian authorities.

Russia acts carefully as well. It is unsatisfied with “the effective use” of the Russian loan of $500 million for overcoming the crisis. However, the Russian government has recently decided to allocate $300 million for modernization of the Armenian NPS; but the sum will be allocated to Russian companies, and the Armenian government will hardly spend it on settlement of social issues.

As for investments, they have reduced drastically in Armenia in the last year. This is explained by the absence of real guarantees providing security of financial investments. Prime Minister Ovik Abramyan takes active but ineffective steps in this direction. Recently he said that Armenian embassies should turn into marketing and investment companies which would provide financial inflows into the country.

Meanwhile, ambassadors expressed their indignation to Abramyan that their offers for attracting investments face no serious support from ministries. Abramyan ordered the relevant ministers to deal with preparing investment programs directly.

Of course, the idea of involving embassies in attracting investors is good, but it needs time and certain conditions. The Prime Minister probably expects to get investments from Armenian businessmen from the Diaspora. However, the idea seems to be an illusion, as the Diaspora is unhappy about the Armenian-Turkish protocols.

The government, which aims to attract financial resources for providing the promised economic growth and management of the country, has faced real problems. And a settlement of the problems seems to be illusive, as internal resources have run out; the West and Russia don’t want to give loans, while the experienced Diaspora tries to distance itself from the problems.