Vaagan Khachatryan, the head of the Economic Commission of the opposition party the Armenian National Congress told Vestnik Kavkaza about the economic problems of Armenia and the prospects of their resolution.
- At the beginning of the year, the parliament approved a loan of $112 million; other loan projects are going to be considered. How does this approach correlate to the fact that the national debt of Armenia has already reached $5.71 billion? What is the correlation between foreign debt and GDP?
- If we count in dollars, I believe the debt will be more than 50% of the GDP. In general, the Armenian economy doesn’t work. How does the country get revenues? One of main sources of the income of the population and the country has radically reduced; I mean the reduction of volumes of transfers from Russia. Moreover, the negative trade balance is obvious – the country continues importing more products than it exports.
Another problem of the economy is absence of working industries, except for a few spheres. The inflow of investments has reduced drastically.
It turns out the money is filled in due to the foreign debt. Over the recent years, the foreign debt has grown by 4.2 billion.
To pay the debt, it is necessary to produce something. If our GDP was based on our production, there was no reason for concerns. $350-400 million are spent on servicing foreign debts. If we look at the structure of our industry and economy in general, it becomes clear that the economy is unable to service these debts. It means we are inside a vicious circle, when loans are taken, they are spent on paying debts, paying interest, but the problem of improving living standards and development of the economy is not solved. It makes me worry, as the situation may lead to the fact that one day the authorities will state that they are unable to service the debts.
- You mean the authorities are weak. However, the government has taken some steps to stimulate business and improve tax laws.
- The strong authorities should have a political will which is aimed at taking real steps to create normal conditions for business. Why is the number of poor people growing? Why are problems of small and medium-sized business not being solved? The current authorities need a society where the majority of people are dealing with social problems and have no time or opportunities to deal with political and economic problems. The political system is directed at expelling the opposition and sound competition both in the political field and in economic life.
The ruling Republican Party of Armenia didn’t fulfill its pre-election promises to provide the 7-percent economic growth, a decrease of unemployment and the poverty level. Over the last 8 years, the unemployment rate has reached 18-20%, the poverty level has surpassed 30 percent; and economic growth has remained at the level of 2.2 per cent.
- What elements are the basis of a system which has no sound competition in business and no economic development?
- The system was working, while transfers were being sent to the country. Their volume reached $2 billion annually, as there were no serious problems with exports. They relied on the economic model, which was based on imports. A few monopolist importers had benefits. The most important thing was that the system prevented the creation of new jobs. Today it is clear that the policy which has been provided by the authorities for many years is failing. There are no more opportunities which are based on providing the economic growth due to transfers from Russia, as well as due to the import sphere. The period of operation of this economic development model is almost over in Armenia.
2016 will be an even more difficult year for the Armenian economy than 2015. This is confirmed by the assessments of officials during the discussion of the budget for 2016. There is another difficult problem along with the reduction of transfers – our migrants intend to take their relatives and friends to Russia. According to demographic data, the trend on continuous migration is becoming more and more dangerous. About 40-50 thousand people leave Armenia annually. This confirms that Armenia hasn’t created conditions for the development of small and medium-sized business, and monopolies are prospering there.
- Do you have a plan to revive the economy?
- Unfortunately, we ran out of all economic opportunities and resources. Armenia is in a deep systemic crisis, which covers the political, economic, social and moral spheres. We have to think about another model of development, but the authorities are not ready for this, as the new model will need political approaches. It is too late to take medicines. There is only one solution to the situation – a political one.
