BUDGET OF DEVELOPMENT AND PROSPERITY

Azat Artsakh – Nagorno Karabakh Republic (NKR)
30 Dec 04

Taking into account the fact during the discussion of the package of
the adherent documents of the state budget 2005 that there was
disagreement only in reference to one of the points of the bill `On
Amendments to the NKR Law on Income Tax’, we may state that on the
whole the government and the National Assembly achieved mutual
understanding. How would you explain this?` First of all, the
government had a serious and responsible approach towards the budget
for the next year assuring its realistic nature. Discussions at the
bodies of the executive, as well as the committees and factions of the
National Assembly in their turn favoured the accomplishment and
clarification of the document. As a result we worked out a document
which will not be an exaggeration to call a program for future
development. Naturally, this served as a basis for full mutual
understanding. – Although the economic year has not closed, it is not
difficult for the minister of finance and economy to present the
anticipated social-economic indices through the analysis of the
results. – First of all, I want to emphasize that the macroeconomic
rates describing the social and economic situation of the passing year
are promising and will serve as good basis for more serious programs
in the coming year. Observations show that the GDP of2004 will total
41.4 billion drams. In order to highlight the significance of this
number I will add that against the previous year it will grow by 15.3
per cent. We anticipate that budget revenues will total 4550.0 million
drams, that is to say, the growth against the previous year will total
43.5 per cent (3170.1 million drams in 2003). The volume of industrial
production will total 18 billion drams (11.1 billion in 2003), and
gross agricultural output will total about 22.3 billion drams,
exceeding the rates of the previous year by 62.2 and 6.1 per cent
respectively. In the republic about 137.0 million kWh of electricity
will be produced (in 2003 130.6 kWh) growing by 5 per cent. Thevolume
of capital building will total 9.2 billion drams (in 2003 8.7 billion
drams) increasing by 5.7 per cent against the previous year. In 2004
the number ofworkers in the republic will total about 34.7 thousand
people growing by 6.2 per cent (more than 2000 jobs). In 2004 the
average nominal salary will total 40 thousand drams (growing by 18.8
per cent), the income of the population will total 42.0 billion drams
(growing by 22.1 per cent). The volume of foreign trade of NKR in 2004
will total 60.2 billion drams growing by 23.6 per cent, export will
increase by 22.7 per cent (totaling 20.9 billion drams) and import by
24.1 per cent (totaling 39.3 billion drams). The total sum on credit
accounts ofthe population by December 1, 2004 was 9.5 billion drams
growing 2.2 times or by 5.2 billion drams since the beginning of the
year. The dynamics of growth of these indices testifies that
significant progress was achieved in the republic and a stable
economic sector was developed which supposes foreseeable
development. Now about macroeconomic forecasts for 2005. In 2005
social andeconomic policy of the Republic of Nagorni Karabakh will be
directed at the maintenance of the achieved high economic rates and
macroeconomic stability, improvement of the investment environment and
quality of life, continuous reduction of unemployment and solution of
social and economic problems. The average rateof the GDP for the years
2005-2007 is estimated about 11.3 per cent. In 2005 the estimated
actual growth of the GDP will total 11.5 per cent (48.0 billion
drams). The average index of the exchange rate of the Armenian dram
will be maintained in the correlation $1 for 500 AMD. In 2005 in the
republic capital building carried out on all the financial sources
will significantly exceed the level of the previous year. The
government will pay special attention to the development of small and
medium-size business which will become a significant factor in
creating jobs. Therefore in 2005 800.0 million drams will be directed
at development of small and medium-size business (against 200.0
million in 2004) of which 75 per cent will be spent on the development
of the agricultural sector (viticulture, cattle breeding, leasing of
agricultural machines, providing 200 million drams for each
branch). Here I should mention that about 30 per cent of the GDP of
the republic is provided by small and medium-size business owners. –
You mentioned that the growth of the gross agricultural output will
total 6.1 per cent. Compared to the growth of the GDP it falls back
ten times whereas there is more potential for development of
agriculture. – At the beginning of 2005 long-term programs for
development of the irrigation system will be launched (costing 500.0
million drams), as well as means will be provided for preservation of
forests (about 83.8 million drams). 50.0 million drams willbe provided
for restoration of forests. In 2005 tax policy will correspond to the
approaches adopted by the government in the recent years assuring the
development of the positive tendencies in the sphere, which will
favour thedevelopment of an active economic environment against the
general background of the economy and will result in economic
growth. – I think it will not be an exaggeration to say once again
that the budget of 2005 will traditionally have a social
character. How will this be expressed? – No doubt, the budget policy
of 2005 will focus on the solution of social problems, improvement of
quality of life on budget means. From January 1, 2005 the average
salary of teachers will grow up to 50500 drams (presently it is
30585), by 65.3 per cent. In 2005 the salaries of medical workers will
grow by almost 26 per cent totaling 36800 drams. The salaries of
workers of libraries, museums, cultural institutions and ensembles
will grow by 22.4 per cent (24 thousand drams). Pensions also will
increase since January 1, 2005. The basic pension will increase from
3000 in 2004 to 4000 in 2005 and the value of one year of service will
increase from 140 to160 drams. From January 1 the benefits of certain
groups of children will increase by 50 per cent. During the year
financial aid will be provided to 7 insecure groups. The veterans of
the Great Patriotic War, disabled, widows of the killed soldiers will
receive aid on the occasion of the 60th anniversary ofthe victory in
the Great Patriotic War on May 9 which will be doubled against 2004.
The state budget of 2005 having a social direction as the expenses on
the social sector total 58 per cent, as distinct from previous years,
significant means will be directed at the development of the sphere of
material production which will, in its turn favour economic
development. Thus, the brief picture of the 2005 NKR consolidated
budget is the following: income totals 9238.1 million drams, expenses
24178.1 million drams, deficit 14940.0 million drams. The budget
deficit will be made up on the means of the interstate loan providedby
the Republic of Armenia totaling 13636.6 million drams of which about
5.5 billion drams is accrued from duty payments at the customs border
of the Republic of Armenia for the consumers goods imported to NKR,
and 1303.4 million drams from other inner and outer sources. The
budget income in 2005 is estimated 6460 million drams against 4550.0
million drams in 2004, and the growth will total 42 per cent. I want
to draw your attention to the fact that only two years ago the actual
income of the state budget totaled 2235.0 million drams whereas the
index for the upcoming year already exceeds the level of 2002 three
times. As to the state budget expenses, since 2002 it has almost
doubled. The expected incomes of the community budget provide only 6.4
per cent of the consolidated budget revenues (tax on law, property,
local duties, and other types of income). The incomes of the NKR State
Fund of Social Insurance in 2005 willtotal 2732.1 million drams. In
2005 the state budget will provide 180.0 million drams for the
creation of the NKR real estate cadaster. – What is the picture of
budget expenses on separate spheres like? – 2005 NKR state budget of
expenses was worked out on the basis of macroeconomic forecasts and
budget rates for separate kinds of expenses. The measures for
improvement of the structure of the budget-finances institutions and
solution of social problems were also taken into account. At the same
time, the demand of maintaining the continuity ofthe measures provided
for by the 2004 budget was met. By the budget bill state budget
expenses were estimated 21400.0 million drams. Expenses on
educationand science total 16.3 per cent (3497.1 million drams) of the
total expenses. It is planned to open boarding schools from September
1, 2005 in Shoushi and Stepanakert to provide elementary and secondary
education to the children of socially insecure families. The estimated
expenses in the sphere of culture, youth and sport will total 748.4
million drams, which is 3.7 per cent of the budget expenses. These
include budget-financed institutions, competitions, services,
subsidizing of theatrical and concert institutions and editorial
houses. The 2005 state budget will provide 100.0 million drams for
restoration and repair of monuments. Taking into account the necessity
of development of sport in the republic, 98.9 million drams will be
provided for this purpose. The provided means will enable the
participation of our sportsmen in international competitions in
different sports and games. Of the sums provided for the development
of sport financial aid of 9.3 million drams will be provided to 15
sports federations and the NKR voluntary sports society. The expenses
in the sphere of health were planned 1210.0 million drams, which has
increased by 340 million since last year. The expenses in the sphere
of social security and social insurance will total 4490.0 million
drams which is 21.0 per cent of the budget expenses and has increased
by 317.7 million drams since last year. 576.6 million drams will be
provided for the benefits paid to separate groups of children. 190.0
million drams will be provided for the needs of the disabled of the
NKR defence and the families of the killed servicemen of which 150.0
million will be spent for providing families of killed soldiers with
apartments. Expenses in the sphere of agriculture will total 789.9
million drams of which 500.0 millionwill be spent on the programs of
irrigation. The financing of important activityin the sphere of
agriculture will continue (protection of plants, test for quality and
sorts of the seeds of crops, veterinary, sanitary service, etc.). –
What about expenses which are not in the main groups? – Transfers will
be made to the budgets of the municipalities totaling 592.6 million
drams. 3900.0 million drams have been planned for capital
investments. – Your opinion on the state budget not as a minister but
as a citizen of NKR. – Drawing your attention to the advantages of the
state budget 2005 I think the government is far from thinking that the
chief financial document of the coming year contains final settlements
of the problems in the spheres of life of the country as there remain
numerous unsettled problems. At the same time, working out the main
directions of social and economic development of the country in 2005,
we may state that the government showed a realistic approach in its
estimates, therefore the government is confident and determined that
it will bring into being its forecasts for 2005. The unprecedented
high social and economic rates of theclosing year underlie this
confidence. On the way of economic accomplishment NKR has achieved
significant progress. Using the occasion I wish our nation a HappyNew
Year and Merry Christmas.

M. PETROSSIAN.
30-12-2004