Wednesday, 17 November 2010
Republic of Armenia Prime Minister’s statement at National Assembly plenary session in connection with FY2011 State budget bill introduction
Dear National Assembly Speaker,
Dear Members of Parliament,
In accordance with Article 90 of the Constitution of the Republic of Armenia, the Government of the Republic of Armenia has submitted to the National Assembly the FY2011 State budget bill.
In this connection, I would like to thank all those members of parliament who proved interested and constructive during the debates.
Following the debates, the government took note of your recommendations and proposals concerning the draft bill for 2011 which will be considered in due form. These ones and any further proposals will be addressed and summarized in a final paper to be submitted to the National Assembly after the current stage of debates, no later than within four days’ time.
Dear colleagues,
The government’s strategic priorities are specified in the Program of Government as approved by the National Assembly on April 30, 2008, as well as in the Strategic Program of Sustainable Development, endorsed by the Cabinet on October 30, 2008.
Proceeding from the Government’s program of activities and relevant action plan and considering this year’s economic development trends, the Government’s social and economic policy in 2011 will be focused on the shift from anti-crisis policy to reform-supported sustainable development.
Economic policy in 2011 will be mainly aimed at economic diversification and export expansion, deepening of the social dimension of economic policy, development of infrastructures, substantial improvement of the business and investment environment, use of additional incentives for economic growth along with the furtherance of the ongoing reforms and priority actions.
After a year’s break, again the State budget law was drafted on the basis of strategically devised medium-term State expenditure program. This State budget bill allows for the 2011-2013 program of medium-term expenditure program reflecting the strategic directions of development of the country.
Thus:
Firstly, mindful of upholding the current pace of growth, the Government will foster macroeconomic stability in the country. For this very reason, it will abide by the fiscal policy embraced over the last few years, with a focus on macroeconomic stability and sustained growth.
Secondly, our macroeconomic policy implies phased budget gap reduction, restraints on the level of public debt conducive to economic development, floating rate of exchange. In particular, inflation is estimated within the bounds of 4 % for the next 12 months with a 1.5% margin. Either the deficit will be limited to 4%. The gap will mainly be covered with borrowed funds due from internal and external sources, with the latter rising to 86.8 percent of the deficit. The forecast of external indebtedness is USD 4305.1 million by the end of 2011. The stated level of foreign indebtedness is deemed to be a low or medium one which in our opinion will not bear servicing threats.
Thirdly, we will continue strengthening the State’s financial position. Increased level of revenue collection is a fiscal priority under the program of the Government which will lead to a higher revenue-GDP ratio amid maintained rates of taxation. Therefore, as in recent years, revenue mobilization will enjoy a progressive pace in 2011 leading to receipt-supported replenishment of budget resources.
While public revenue, welfare contributions and duties were projected to the amount of AMD 675bn in 2010, we have set a target of AMD 773bn for 2011 that is about 100 billion drams in excess allowing for those privileges offered to taxpayers in 2009-2010 under the government’s anti-crisis program. In particular, major investors were accorded a deferment on VAT payments. Such investment projects have already been approved to a total amount of 30 billion drams. Note that thanks to tax reform some 35.000 small and medium-size businesses were taken into the field of fixed payments. As a result, AMD 24 billion worth of extra liquidity was left with such entities and although the treasury will fall short of the stated amount, AMD100bn more revenue will be raised in taxes, social payments and duties. At the same time, the taxes-GDP ratio is due to improve in 2011 thanks to better tax management and reform.
Spending policy will continue to be based on those target programs approved together by means of government decrees. I would only add that main accents will be made on economic diversification, infrastructure development, national security and better governance, strengthened financial position of local self-government, as well as the country’s enhanced rating as a punctual and reliable borrowing partner.
The wage threshold will be raised consistently in the Republic of Armenia which is expected up 8.3% in 2010.
In 2011, 86.6% of budget spending will affect the following spheres:
- Public welfare: education, healthcare and social security – 44.4 %,
- Defense, public order enforcement and national security – 18.8 %,
- Economy – 15.6 %,
- Official treasury grants to community budgets – 3.3 %, public debt service – 4.5 %.
The welfare sector will get 11.8% more investment against the GDP in an effort to support the government programs of reduced poverty, enhanced living standards and social justice, low social polarization, modernized research and education, as well as broader access to education. The foregoing is broken down as follows: education - 2,9 % of GDP, social protection - 7,23 % of GDP, healthcare - 1,7 % of GDP.
These sectors will get a total of AMD 442bn in State investment, a 43 billion rise over 2010.
Our ministers will give you the details of expenditures.
Dear colleagues,
Considering that the questions of primary concern to the members of parliament have been discussed in all detail at standing commission sittings, I would like to wrap up my statement by thanking you for the debates held in the National Assembly. You may agree that it would be hard to overestimate the State budget’s importance to ensuring normal development for the nation, as whole. Therefore, we will keep on cooperating with you, and all your proposals will be taken up during the upcoming discussions.
I am convinced that the decisions made together with you will lead to a better-balanced budget law and improved conditions for the development of our State in 2011.
Thank you.
