Armenia’s budget deficit to increase in 2020

9 October 2019 14:30 (UTC+04:00)

By Abdul Kerimkhanov

Armenia approved its draft budget for 2020 at an extraordinary meeting of the Armenian government on September 20. Some parameters of the country's main financial document are already attracting attention and generating discontent among the population.

Thus, according to the project, in 2020, budget revenues will amount to 1.69 trillion drams ($35.4 billion), expenditures - 1.88 trillion drams ($39.4 billion), and the budget deficit will be 183 billion drams ($383.6 million).

Compared to 2019's indicators, it is worth noting that the growth in budget expenditures is noticeably higher than a slight increase in revenues. So, in 2019, revenues are planned at 1.49 trillion drams ($31.2 billion), expenditures - 1.64 trillion drams ($34.4 billion), and a deficit will be 151.6 billion drams ($317.8 million).  

That is, next year’s budget expenditures will exceed revenues by 40 billion drams ($83.9 million). In addition, the budget deficit will increase by 31.4 billion drams ($65.8 million).

The Armenian budget traditionally spends more than it receives. So in this regard, the document does not represent anything new. Although the enthusiasm of the new Armenian authorities made it possible to hope that the post-revolutionary government would strive to reduce the budget deficit, it is exactly the opposite and the deficit is growing.

The budget deficit is usually covered mainly by credit funds. This means that in order to fulfill the 2020 budget in the form in which its draft was approved, the Armenian government will have to incur new debts.

From this perspective, it’s not surprising that the Armenian government intends to take a new loan in the amount of $250 million. Although this information has not yet received an official confirmation, it is obvious that credit funds are needed to meet the budget, both the current year and 2020. So, obviously, it will not be possible to avoid a significant increase in the country's debt burden next year.

At the same time, it is not entirely clear why it is planned to ensure such an increase in the revenue of the 2020 draft budget. Only people who are unfamiliar with the economy can believe the words of the head of the Armenian government that the Armenian economy is developing rapidly. The real development of the economy as a minimum should be accompanied, for example, by an increase in electricity consumption. However, in this sphere, a decline is constantly recorded in Armenia.

Of course, in terms of the inflow of funds to the treasury, the Armenian government can count on tax administration mechanisms. However, this resource is limited and too unstable to associate with it an additional influx of money into the treasury.

However, IRS agents can still predict that in 2020 tax revenues will increase significantly. It is almost clear that gas prices in Armenia will increase in the future. The question is only when exactly this will happen and to what extent. An increase in gas tariffs will inevitably lead to an increase in tax revenues from gas sales without an increase in volumes. 

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Abdul Kerimkhanov is AzerNews’ staff journalist, follow him on Twitter: @AbdulKerim94 

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