YEREVAN, OCTOBER 4, ARMENPRESS. Finance Minister Vardan Aramyan says the overall economic environment of Armenia was taken into account while drafting the 2017 state budget, attempting to present a reasonable budget, which will correctly reflect the country’s economic reality.

“Why did we present such budget draft? First of all, let me answer the question from the point of view of economic development. I am frequently being asked about the Prime Minister’s statement that the economic situation is quite serious. Please accept those words as reality, but it doesn’t mean at all that we should form negative expectations regarding the future. We have appeared in a situation, which isn’t only peculiar for the Armenian economy. That’s the way it is in the whole world, in both developing countries and also similar situation is seen in regional countries”, Aramyan said.

According to him, the reasons are the following: there have been two significant developments in the past two years.

First, when sanctions were implemented against Russia, and Russia is Armenia’s most important trade partner and the majority of transactions are made from Russia. Naturally, it had to have a negative impact on transactions.

The second issue concerns the decrease of raw material prices in the global market. Generally, a 20% decrease of prices was documented. The Minister noted that Armenia is a raw-material exporting country, around 50% of exports are raw material products, metallic minerals. Due to price decrease, less foreign currency was received while exporting the same amount of raw materials. As result – only transfers decreased by around 700 million USD in two years – 2014-2015, and in 2016 it is expected to decrease by around 140 million USD. It is obvious that this much foreign currency didn’t enter Armenia.

“In this case, if the government had implemented counter measures, there would be a negative economic growth. That’s why during the last two years the tax-budgetary policy has been expansionary. This means that more expenditures were made, and more money was injected into the economy at the expense of the deficit, in order to reimburse the decreasing flows of foreign currency from the outside world. This has led to the fact that in 2015 the budget deficit to GDP was 4.8 percent, and with 2016’s results we expect 5.9-6%”, he said.

According to him, in case of having big deficit, it was necessary to the same amount debt.

“According to indicators, the debt in 2014, 2015, 2016, is growing approximately by 900 million. That’s almost as much as we had decreases in transfers. Meaning,  if we didn’t have the tax-budgetary expansion policy, we would have a drastic depreciation of exchange rate and a lower level of economic growth”, the minister said.