Armenian Economy Faces the Challanges: improving pension system, reducing gas subsidization and raising the competitiveness of economy

I don’t really trust anything IMF says or does, however, the issue they have raised about Gas subsidization is an important one. Yet another serious blow to the Armenian economy, alongside with inflation of dram, dying exports and growing production costs as a result of dram’s valuation against US dollar is expected in 2008, and I don’t see anyone in the Armenian politics talking about these issues, which are perhaps more urgent, then the NKR conflict and erosion of freedom of speech in Armenia.

[AZG | Publication date – July 04, 2007 | By Ara Martirosian] There are three main issues in the economy of Armenia according to IMF representative of Armenia: the amendments in pension system, gas subsidization and competition of economy.IMF welcomes the new project of the Armenian Government to improve the pension system. The pensions are very low in Armenia at present. It’s necessary to increase the subtractions for the pensions and to raise the pensions. It may also influence the inflation index.
The next issue is the subsidization of gas, as the subsidization time of the gas ends by the end of 2008, and after it the gas prices will rise rapidly. There is a big threat that the consumer prices will also have a rapid rise influenced by the gas prices. IMF representative advised the Government to reduce the subsidization gradually. And also to subsidize only socially not provided strata.
The issue of the competition of Armenian economy is connected with the valuation of Armenian dram. In spite of a great number of inflows of foreign currency, which have a negative influence on some export spheres and the households that are dependent on private transfers, the IMF records that the economy of Armenia remains “competitive on the whole”. In order to preserve the competitiveness, the Government of Armenia should invest additional efforts to improve the business environment and to increase the productivity.


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