ARMENIA: REPORT SHOWS SIGNIFICANT DECLINE IN POVERTY
Haroutiun Khachatrian: 11/09/04

Eurasianet Organization, USA
Nov 10 2004

A recent economic survey in Armenia, showing a significant decline in
the number of citizens living in poverty, has placed President Robert
Kocharian’s administration in a somewhat awkward position. While
Kocharian has been eager to show Armenians that living standards
are improving, the report’s findings could complicate the Armenian
government’s efforts to secure international aid for poverty-reduction
programs.

The annual survey of household incomes by the National Statistical
Service, a non-governmental agency, contained a full range of startling
statistics. Among the most surprising: the percentage of Armenians
living below the poverty line fell from 50 percent in 2002 to 42.9
percent in 2003. Similarly, the number of poorest Armenians – those
who earn less than 7,742 drams (about $15) per month – also took a
surprising plunge — from 13.1 percent of the population in 2002 to
7.4 percent in 2003. At the same time, the survey indicated that the
country’s income gap between rich and poor narrowed slightly.

The statistics reveals that the poverty reduction rate in Armenia
far exceeds the government’s projections as outlined in its Poverty
Reduction Strategic Paper (PRSP) released earlier this year. In the
PRSP, for example, officials estimated that that it would take until
2012 before the so-called “very poor” could be reduced to less than 8
percent of the population. The NSS figures show that this benchmark has
been surpassed a full eight years ahead of the government’s schedule.

Given the NSS findings, questions are already being raised about the
accuracy and potential effectiveness of the government’s anti-poverty
blueprint. While officials have been happy to tout the reduction
in poverty, already one government minister has disputed the NSS
findings. At a recent news conference, Vardan Khachatrian, the minister
of finance and economy, described the results as difficult to trust
and too optimistic.

Some economic experts share Khachatrian’s doubts. “I cannot see the
reasons which could bring about such a drastic change in the percentage
of the population made up by the very poor,” said Ruben Yeganian, a
researcher at Yerevan’s Institute of Economic Problems. The decrease
was particularly improbable for 2003, when Armenia’s inflation rate
soared in response to an increase in foreign grain prices, Yeganian
asserted. That year, bread prices increased by 31 percent between
January and December, causing an overall 8.6 percent increase in the
consumer price index, compared with a 2-percent rise the previous year.

A recent report by the International Crisis Group (ICG) echoes
Yeganian’s assessment. The October 18 study, titled “Armenia:
Instability Ahead,” states that while the market reforms of the
1990s may mean Armenia is now enjoying a relative boom, relatively
few Armenians have seen a vast improvement in living standards. “The
benefits of economic recovery are not equally shared,” the report
found. “There is little sign of poverty decreasing.” [For additional
information see the Eurasia Insight archive].

Contradicting the NSS, the ICG report cited statistics that show 55
percent of the population lives in poverty, with wealth concentrated in
Yerevan and in “circles close to the government.” Meanwhile, the exodus
of educated, well-trained workers — one of the main obstacles to an
Armenian economic comeback — continues. Favored labor markets include
Russia, Central Europe, Ukraine and Turkey, where potential salaries
are higher than the $78 average monthly salary to be had in Armenia.

The poverty issue has figured prominently in the ongoing power struggle
between Kocharian and opposition political parties. [For background
see the Eurasia Insight archive]. In an attempt to outflank his
critics, Kocharian unveiled a 12-year plan for fighting poverty in
June. Yeganian speculated that the government may have cast doubt
on the NSS findings in order to prevent a decrease in foreign aid
programs. An additional factor feeding official concerns, Yeganian
suggested, is the decrease in value of the US dollar against the
Armenian dram over the last year. As a result, the incomes of
Armenians, when denominated in dollars, appear to have increased.

The Armenian government counts heavily on international aid to
promote economic stabilization efforts, including anti-poverty
programs. Armenia hopes to receive $100 million for various economic
development schemes in 2004 from the US Millennium Challenge Account
program, aid monies that are contingent the country’s record for
democratic reform and human rights. Also in support of Kocharian’s
agenda, the World Bank has pledged to deliver $250 million by November
2004 for work on rural schools, infrastructure and irrigation systems.

Some representatives of the NSS themselves have admitted to being
caught off guard by the survey’s results. Hovik Hohannisian, head of
Food Security Statistics, raised questions about the criteria used
to determine who is “very poor,” saying that the food basket used to
determine purchasing power was actually more like a “bread basket.”

Meanwhile, one of the country’s main creditors, the World Bank,
said it saw no reason to doubt the NSS data, the Bank’s Yerevan
spokesperson, Vigen Sargsian, told EurasiaNet. Aside from the World
Bank, the NSS’s data is routinely cited by international organizations,
including the International Monetary Fund. The NSS also receives
advice from representatives of the European Union and the US Agency
for International Development.

Editor’s Note: Haroutiun Khachatrian is a Yerevan-based writer
specializing in economic and political affairs.