1 BILLION DOLLAR MARK REACHED FOR 1ST TIME BY 2006 DRAFT STATE BUDGET

Noyan Tapan News Agency, Armenia
Oct 12 2005

YEREVAN, OCTOBER 12, NOYAN TAPAN. The joint sitting of the RA National
Assembly Standing Committees started on October 12 with duscussions of
the 2006 draft state budget. It is envisaged to put it on the agenda
of the regular 4-day session to be held on October 24.

According to RA Prime Minister Andranik Margarian, the government
broke the tradition and submitted the draft state budget to the NA a
month earlier. Another distinctive feature of the draft is that the
budget reached the 1 bln dollar mark for the first time. Like those
in the previous years, the draft has a social orientation and has
been developed based on the medium-term and long-term programs of
the coalition formed in 2003.

The draft state budget’ revenues make 381.98 bln drams, expenditures –
451.88 bln drams, and deficit – 69.9 bln drams. Nominal GDP of 2,400.7
bln drams or 5,127.6 mln USD is forecast for 2006. Real GDP growth
of 7.5% and deflator level of 3% are programmed. The government
consisers it quite probable that real GDP growth will exceed the
programmed one, since there are sufficient economic preconditions
for ensuring higher economic growth. The draft envisaged inflation
of 3%. The overall revenues of the state budget will make up 15.9%
of GDP, expenditures – 18.8% and deficit – 2.9%.

By the draft state budget, about 98.3% of current revenues or 362.8
bln drams will be received from taxes or state duties. This index
exceeds the amount approved for 2005 by 16.8%. According to the
government, the source of the forecast tax revenue growth is the
continuing activity of the economy, as well as the measures taken by
the government to reduce its shadow sector.

As previously, it is envisaged to finance the deficit mainly from
external sources. Net external sources of financing will make up 52.2%
of the total, with the rest of the deficit to be covered from revenues
received by issung government bonds, and at the expense of the state
budget balance at the beginning of 2006.