Is the world to blame for the underdevelopment of Armenia?

The Armenian parliament is discussing the draft of the state budget for 2016. The draft requires real growth of GDP at a level of 2.2%, inflation at a level of 4% and the budget deficit at a level of 3.5% of GDP. An increase in salaries and pensions is not required. The balance between foreign debt and GDP may reach 50%. Revenues are planned at a level which is lower than in 2015, while the expenditures of the state project will exceed the similar index of 2015 by 68.1 billion drams ($1=480 drams). Prime Minister Hovik Amrahamyan stated that the principles of realism and stability lie at the basis of the document – the draft has a clear social direction, which is confirmed by the fact that half of the whole volume of budget expenditures will be spent on education, social security and healthcare.

Many experts are worried about the fact that for the first time in the last 10 years a decline has been registered in the revenue part of the budget. Specialists pay attention to the growing problems with the foreign debt, and its volumes may exceed 50% of GDP. According to the economist Vilen Khachatryan, the country will enter 2016 with a debt of $5.122 billion; it is $680 million bigger than the sum at the beginning of 2015: “The budget requires paying 99 billion drams in interest. 2016 is a year for providing economic growth at the expense of debts, and the pace of growth will gradually reduce. How can we speak about development?”

The economist Ashot Yegizaryan has similar views. According to him, the state has no sources for fulfilling its duties on existing debts, yet it creates new debts: “Indexes of the state budget draft for 2016 indicate that Armenia is entering a phase which doesn’t provide economic growth. In reality, we are in a recession.”

The Finance Minister, Gagik Khachatryan, thinks that it is difficult to imagine that all problems will be solved due to the indexes required by the draft: “Unfortunately, there is no such opportunity.” According to him, the reasons for the negative trends in the economy are certain objective internal factors, such as a decrease in the consumption level and economic activity, as well as several external factors – a reduction in investments, problems in the Russian economy, a decrease of transfers from Russia.

Over the past years, representatives of the Armenian authorities, some experts and the government-controlled media have been actively promoting the idea that the majority of the economic problems of the country are explained by external factors. Previously, all the troubles were connected with the world financial crisis; today Russia is called the center, as its economy greatly influences the Armenian economy.

Some ministers of the economic bloc refer to the unpredictability of the consequences of Armenia’s membership of the Eurasian Economic Union (EAEU). However, two years ago, when the President decided to join the EAEU, there were absolutely the opposite assessments. Such a turn in approach cannot be called responsibility for decisions taken. However, problems in the Armenian economy existed long before it joined the EAEU. For example, the growing influence of monopolies and the absence of real competitive conditions in Armenia cannot be connected with the current problems in Russia or with its membership of the EAEU.

“I have participated in parliamentary discussions of the state budget draft four years in a row. And each time I hear one and the same phrase – that the slow pace of economic growth is connected with external factors. Our country is not developing, and it is not the world’s fault. In 2008 Serzh Sargsyan became the president and promised economic growth of 7%, but in general, summing up all these years, we have economic growth at a level of 15.4%. It is a disaster; our country doesn’t move forward,” the opposition MP, former Prime Minister Grant Bagratyan says. According to him, the budget has grown by only 6% over the past 9 years. “We should deduct the total inflation of 55% over 9 years from 61% of the budget growth in the national currency. It appears that the real growth of the budget is only 6% over the past years,” Bagratyan says.

According to the economist Vaagan Khachatryan, the draft budget for 2016 reveals the incompetence of the current economic system: “The policy provided by the authorities cannot provide either economic growth or attract investment. A favorable environment, which is absent, is needed for investments. There are no effective state institutions, no independent court system, or trust in the system in general. The budget draft’s content is absolutely uninteresting.”

The former Foreign Minister, an MP from Prosperous Armenia Faction, Vardan Oskanyan, thinks that economic growth can be provided, despite any external factors: “It is necessary to focus on economic growth, providing a broad monetary and fiscal policy, even if the deficit grows. A certain concept and a program of the country’s development are necessary for a successful fulfillment of the policy.”

However, the government hasn’t found the political will to write a real program for the country’s development, to take measures to encourage economic growth, including reforms and implementation of programs for development of infrastructure; the authorities also cannot restore the trust of investors and the population. As a result, over the past 7-8 years, the government blames its failures or passivity on external factors.