Artsvik Minasyan: “Armenia's foreign debt is growing because of IMF and WB “recommendations”

Interview by David Stepanyan, Yerevan. Exclusively to Vestnik Kavkaza

Armenia is preparing a budget for 2013. The member of the Armenian parliament from Dashnaktsutyun, the member of the committee on financial and credit and fiscal issues, Artsvil Minasyan, told Vestnik Kavkaza on prospects of the budget project 2013.

-          Does the presented project of budget for 2013 reflect settlement of real problems and social challenges of the Armenian society?

-          The project of the Armenian state budget for 2013 doesn’t require any effective mechanism of struggling against the most acute problem in the republic – unemployment. Approaches required by the budget project cannot contribute to settlement of serious internal and external tasks. For example, of the main instruments for overcoming huge unemployment should be adequate fiscal allocations. But we can see that no measures in this direction are included into the budget project. It is vital to stimulate the growth of the employment rate. The state budget project states that the unemployment rate will decrease in 2013 only by 0.1%. It means only 1200 working places will be established, even though earlier the government stated about 10 000.

It is happening in the situation where unemployment includes 20% of the population, i.e. about 240 thousand people. And it is only the official statistics which doesn’t reflect tough reality. That is why I think the budget for 2013 is weak, especially in the context of deep and wide-scaled challenges which our country faces. I have noticed no points aimed at overcoming these challenges in the project. From the point of view of qualitative and demographic growth and economic development, this budget causes a neutral and even negative impression.

-          A significant part of the state budget’s expenses is allocated to the Armenian foreign debt services. The Republican PMs always nod at this, justifying impossibility of increasing social benefits to low-income layers of the population…

-          Since 2003 I don’t remember a year without increasing pensions. Probably it was not huge, but it really has taken place. Next year we will see the price growth, and the government is not merciful even to pensioners if it doesn’t increase expenses for the social sphere. The foreign debt is not the reason, as it is only a small sum which is demanded for increasing pensions. The volume of the foreign debt wouldn’t concern us, if these sums were used effectively, i.e. if new working places were established.

-          Are there positive moments in the state budget project?

-          There are positive moments, but they won’t be really effective. The government has accepted the strategy of establishing industry oriented at export, but they are going to stimulate the segment by a ridiculous sum – 300 million drams. It is naïve to state on an expected rapid growth of industry under such an insignificant state support. All this happens in the context of the huge unemployment rate.

The agricultural year was successful only due to nature. The government contributed nothing to it as it is dealt only with implementation of the bank policy of expensive money. When the authorities do not allocate even social money to the increase of the standard level, it means the money services those people who produce it. It is an unacceptable approach.

The government failed to diverse the revenue part of the budget for providing stable development and restructuring of economy. We set the question on where money goes during the parliamentary discussion with the minister of financing, but we didn’t get an answer. Considering the practice of previous years, it seems important long-term programs will pale into insignificance.

-          What role does corruption play in the ineffectiveness?

-          We get used to discuss ineffectiveness of using fiscal resources, violations, tricks, and abuses. For prevention these phenomena a whole complex of arrangements is needed, rather than separate meetings and excoriating in separate departments at various levels. A decent standard of living should be provided to bureaucrats and social workers for fighting corruption. For example, Armenia has only 1400 schools, and the government cannot provide adequate conditions for the educational process while huge sums are allocated for “renovation of schools” every year. It means the resources are used ineffectively. The reason for this is not a lack of money, but inadequate approaches.

-          The global crisis of 2009 led Armenia to the 15-per-cent decrease. How can the situation in Russia and the euro area countries influence the situation in Armenia next year?

-          Our government still lacks independence in acting, which is needed for competent independent economic policy. I see duality instead of this. For instance, the prime minister Tigran Sarkisyan, speaking in the parliament, stated on necessity of signing an agreement on deep and wide-scaled free trade area with the European Union and on continuation of cooperation within the EurAsEC. We understand that diversification of economic policy is necessary for Armenia today. Even though Russia is our strategic partner, we shouldn’t forget about Iran which has deep and serious economic ties with Armenia. These relations should be improved for decreasing possible risks and gaining new opportunities.

Armenia took rather serious duties within cooperation with the EU, but they are so ambiguous and contradicting sometimes that we have to make choice.

-          Speaking about the EU, do you mean ineffective using of the foreign debt because of the IMF and the World Bank’s recommendations or do you mean something else?

-          The main threat comes from “recommendations” by the International Monetary Fund and the World Bank. Such international financial organizations are instructing the Armenian government on making these or that decisions today. And the instructions are not always beneficial for Armenia. The IMF and the WB led Armenia to a very difficult economic situation, even though they have to contribute to development of our economy. We take more and more debts, but at the same time these resources are not allocated to needs of common people. The debt doesn’t encourage development of economy. Recommendations from the IMF and the WB encourage development of the service sphere rather than the real segment of economy, industry. Without industry we are doomed to live in poverty.