World Markets Research Centre
March 13 2009

Armenian Finance Minister Advocates Spending Cuts

Natalia Leshchenko

Armenia’s Finance Minister Tigran Davtian has argued at the Cabinet
meeting that the spending of 131 billion drams ($354US million) should
be delayed until the fourth quarter of 2009, armenialiberty.org
reports. The minister says that the spending was planned on the basis
of projections for 21% rise in tax and other revenues for the budget,
but the January statistics has shown a 11% drop in revenues as well as
the shrinking of GDP. Davtian said that the fall in tax revenues could
reach 93 billion drams or over 10 % of the yearly target. Davtian was
supported by Prime Minister Tigran Sarkisian who said that the
government should effectively switch to quarterly planning, and asking
ministers for austerity.

Significance:A transfer to effective quarterly planning might have
good rationale but will require careful organising due to the
existence of early payments. Austerity is also challenged by the
rising utility tariffs, but the Armenian government hopes to fall back
on Russia’s $500US million loan to cover most essential budgetary
needs. Overall, the governing team has proven reasonable and capable
so far, and the minister’s recent speech suggests that they are able
to react to the changing circumstances.