ARMENIAN PARLIAMENT RAISES STATE BUDGET DEFICIT LIMIT FROM 5% TO 7.5%

Noyan Tapan
June 3, 2009

YEREVAN, June 3. /ARKA/. Armenian parliament passed amendments to
the country’s law about budgetary system at its special session
Tuesday. The amendments envisage increasing the allowable limit of
state budget deficit from the current 5% to 7.5%.

Deficit to GDP relation is brought up to 7.5% due to finance budget
deficit and mitigate the global crisis effects.

The global financial and economic crisis had negative impact on
formation of income part and creates difficulties in implementing
the annual program, Davtyan said. In this respect he pointed out the
necessity to attract considerable additional borrowings. Armenian
Government is now actively negotiating over this, the Minister said.

Raising the limit will five the government flexibility in attracting
additional funds to meet on-budget expenditures and implement
the planned programs while promoting economic development, Davtyan
said. The new limit does not mean that this level must be reached by
the end of 2009.

"In the last years Armenian state budget deficit was not exceeding
3% against the planned 5% level, yet we have concerns that the 5%
limit will be exceeded due to the crisis, but we expect certain
improvement as early as in 2010," Davtyan said adding that if the
economic situation is improved deficit to GDP relation may be again
reviewed downward.

The 2.5pct increa se in deficit level mean raising the deficit by
70bln Drams only, as 1% deficit in relation to GDP is almost 31bln
Drams, the Minister said.

The decision on increase of the deficit points to availability of
financial sources. In particular, an additional of 300bln Drams or
about $100mln was attracted from four foreign sources, he said.

Davtyan also said that the increased deficit will have no effect
on the external debt that is about 13% today with maximum allowable
limit being up to 50%.

Chairman of the parliament commission for financial, credit and
budgetary issues, member of the Republican Party of Armenia Gagik
Minasyan said that the raising of the deficit will allow intensifying
the economy and help bring close the end of the crisis.

Members of the opposition "Heritage" parliament group considered
it unworthy to increase the deficit and advised to strengthen
administrative measures to ensure budget receipts.

Armenian state budget deficit (without funds from target programs
financed by international organizations and foreign countries) amounted
to 21.7bln Drams in January-April 2009 – 44.4% of the planned deficit
level for the first quarter.

State budget receipts were over 195.4bln Drams in Armenia in the
reporting period – a reduction of 9.9% or 21.5bln Drams as compared
with the same period of 2008.

On-budget expenditures totaled 217.2bln Drams in January-April – an
increase of 5.6% or 11.6bln Drams against the same period of last year.

According to Armenian state budget, total income was planned at 905bln
Drams, expenditures – at 945bln Drams and deficit at 40bln Drams.

($1=369.93Drams).