Tigran Sargsyan: Armenia has accumulated enough financial safety margin
to counteract consequences of world economic crisis

2008-12-30 22:48:00

ArmInfo. Armenia has accumulated enough financial safety margin to
counteract consequences of world economic crisis, Prime Minister of
Armenia Tigran Sargsyan told representatives of some local news
agencies. In response to ArmInfo’s question about anti-crisis measures
envisaged for 2009 and the model of macroeconomic regulation of crises,
T. Sargsyan said that like the government of any other country, the
Government of Armenia has several scenarios of developments on the key
macroeconomic indicators and each scenario has an action plan. He said
the key task of the government is to evaluate the internal potential of
economy, the private sector, to meet new challenges. In this aspect,
the premier said, there are several factors able to successfully
counteract challenges. First of all, it is a private sector that has
accumulated serious potential over the last ten
years, material and financial reserves and ability to work in
conditions of market economy, uncertainty and sharp market
fluctuations. The second factor is connected with the country’s
readiness for challenges from the point of view of reserves and
possibilities. The premier is sure that due to the reasonable
macroeconomic policy of the government for the last ten years, Armenia
has accumulated enough financial safety margin and tangible20reserves of
own funds at the Central Bank amounting to $300 million.

‘These funds will make its possible fulfilling the budget for 2009
irrespective of tax revenues>, Tigran Sargsyan said. Among key factors
of financial safety margin, the premier mentioned the low level of
internal debt in the ratio to GDP (about 17%) and the envisaged low
budgetary deficit in GDP ` 0.8%. This makes it possible spending big
funds not fearing for the negative influence on macroeconomic
indicators. The premier said the anti-crisis program of the government
mainly aims to sharply increase infrastructure costs. For instance,
construction of roads, energy, water supply, and irrigation facilities,
as well as disaster zone rehabilitation. Thus the Government intends to
invest in infrastructure projects in energy sector nearly $300 million,
in water supply and irrigation sector – nearly $300 million, in
large-scale construction in the disaster zone – about $250 million on
the funds of the budget, government reserves and the World Bank, Asian
Development Bank, credits from other sources. Tangible funds will be
invested also in construction and reconstruction of the highway linking
Armenia and Georgian town of Batumi.

Asked about the inflation scenario prime minister said that in the
conditions of the anti-crisis actions on stimulation of growth the
policy of the government will be ‘extensive in connection with supposed
deflation processes’. ‘The inflation=2
0level in November and December has
never been so low as in 2008. We think that the inflation potential
that was fixed at the beginning of 2008 and was stemming from the world
financial and trade markets (in 2008 Armenia imported 70% of inflation)
has sharply fallen because of prices reduction at the world markets,
reduction of bread and bread products, wheat and fuel and lubricants
prices. This creates favorable background for the extensive policy
which will be conducted by the government. That is to say, the
macroeconomic parameters which were involved in 2008 were also creating
coefficient of safety to reject negative consequences of the financial
crisis. This had and still has a serious anti-crisis element’, –
Armenian premier said. He also added in spring when negotiating with
the IMF and the WB the government fixed the circumstance according to
which if to follow strictly the planned macro-economic indices this
will create favorable conditions for prevention of the negative
consequences of the financial crisis. Moreover, sharp increasing of the
indices on tax collection was also of great significance in this
context. ‘We increased the final indices on the tax revenues threefold
by this correcting the budgetary revenues because of the growth of the
predicted index of the GDP. But at the dame time we decreased budgetary
expenses. Increasing revenues and decreasing expenses we have sharply
increased financial potential of the state’
, – he said.

Asked about the macro-economic indices for 2008, Sarkisyan replied the
current year will be finished with good marco-economic indices, the
budget will be fulfilled and there will be no non-fulfilled expenses.
Inflation will be within the frames of the predicted level. ‘In fact,
all these marco-economic indices were a serious ground for the rating
agencies Moodys Investor Servise and FitchRatings, which despite all
the challenges and problems increased rating of Armenia in 2008. ‘This
is very much important that the agencies correctly assessed as the
steps of the government were right. We shall not have the double-figure
growth of GDP this year. This is conditioned with sharp falling in the
mining industry and much reduction of the growing rates in
construction’, – the premier said. He is sure that the state support
programmes of the enterprises in 2009 will neutralize negative
consequences of the world financial and economic crisis.