Armenia Economy

Armenia's 2.5 Billion Budget for 2008 – A Realistic One

Traditionally, the amount of attention given to the State Budget in Armenia is nil. This important document, which sets out exactly how the country will develop in the next year, defines the mechanisms of how the state policies and activities will impact every single citizen in the country, is usually presented as an indecipherable book of figures, which is hardly ever explained to the average citizen. This year however, everything changed with the sensational announcement of Prime Minister Serge Sargsyan: the state budget will be 2.5 billion dollars, which is nearly double of the state budget in 2007.

[September 17, 2007 |Lragir]It became known from Serge Sargsyan’s speech a few days ago that the Armenian government is going to present a draft budget of 2.5 billion dollars to the National Assembly for 2008. It is about 1.5 times bigger than the budget of 2007. The first question that occurs after hearing this number is where the government’s ambitions come from. The question certainly has an answer that appears first: Serge Sargsyan desires to become president of Armenia in 2008, and a state budget of 2.5 billion dollars is an excellent election campaign for the prime minister aspiring to presidency.

As my collegue Gegham Vardanyan, accredited journalist in the NA noted, that it had seemed as though Serge Sargsyan had come to the NA that day only to announce this figure, and a couple of others along the way: the military budget planned for 2008 will be equal to that of Armenia’s state budget in 1998 (which means something around 400 million dollars), and the claims of Azerbaijan to make their military budget equal to the total state budget of Armenia have failed. The last one sounds childish for a Prime-Minister and former Defense Minister to announce if you ask me, but oh well!
There have been a number of publications in the newspapers, as well as the blogosphere discussing the unexpected figure. Despite the Prime-Minister’s words, that he is not and adventurer, and the budget is a realistic one, nobody seems to have taken it seriously. The 2008 Presidential Election Monitor blog, for example, has seen it as the start of the pre-eleciton campaign.
Despite the analyses in the media and the widespread scepticism, I find this article in worth every attention, as it steps behind the curtain of disbelief, and tries to see what will happen if the budget is indeed a realistic one, and if, as the Prime-Minister noted, there is a need to increase the state revenues by acheiving almost a two-fold increase in tax revenues.

The point is that with the methods and approaches of tax collection the so-called battle against black economy will clamp down on the retailers rather than the owners of markets, and after paying the last thing they have the independent small and medium-sized businesses which are not in the domain of any oligarch will be unable to bear the tax load any more and will have to sell their businesses to the oligarch or make an arrangement with them to work under the protection of that particular clan. It means that any such performed budget will push Armenia closer towards a clannish economy, and one day the society will wish it had no budget and trouble.