Armenia’s 2023 state budget draft envisages increasing defense spending by 160 billion drams

YEREVAN, OCTOBER 24, ARMENPRESS. Armenia’s 2023 state budget draft envisages increasing the defense budget by 160 billion drams, which will comprise around 505 billion drams. The draft also envisages that the state debt in dram terms will decline.

In an interview to ARMENPRESS, Deputy Minister of Finance Vahe Hovhannisyan presented details about the 2023 state budget draft.

“This is the second budget of the government’s 2022-2026 action plan. We are consistent with the implementation of priorities set by the government’s program. We have adopted a certain sequence of actions”, he said.

The expenditures by the 2023 state budget will comprise around 2 trillion 590 billion 147 million drams. As a result, the social sector expenses are the largest.

Speaking about the increase in spending, the deputy minister said next year they will try to improve the country’s security environment, by creating stable grounds for further development. Thus, the largest increase will relate to the improvement of ongoing infrastructure in defense sector. “In terms of percentage, the defense spending has further increased than it was in the past. Around 505 billion drams have been envisaged for the defense expenditures in 2023, which is more by 160 billion drams compared to 2022. No such increase is envisaged for any other field”, he said.

State budget allocations are expected in almost all spheres next year. The deputy minister said that pensions will also rise. This is one of the biggest allocations in spending parts of the state budget. The investments on infrastructures will continue. Mr. Hovhannisyan said the North-South highway project remains one of the strategic priorities of the government.

According to the 2023 state budget draft, 144 billion drams (a budgetary loan) will be provided to the Republic of Artsakh, the same amount as it was envisaged in 2022. Moreover, there will also be a new measure for the families displaced from Artsakh which will enable 1283 such families to purchase residential real estate or construct a private house.

The 2023 state budget draft also forecasts at least 7% economic growth. “This 7% economic growth was envisaged by the government’s program. 7-9% economic growth on average was forecast for the next few years”, Hovhannisyan said.

Asked at the expense of which sectors this growth must be ensured, the deputy minister presented the expected figures. Growth is expected in almost all spheres: 5.1% in industry field, 3% in agriculture, 9.6% in construction and 8.2% in services sector.

The government also aims at increasing the productivity growth. For this purpose the Ministry of Economy is providing assistance to enterprises which want to purchase new equipment, technologies, that will lead to a productivity growth.

Asked whether they have considered the possible risks that could emerge during the year while outlining this figure of GDP growth, the deputy minister of finance assured that they take into account all risks which exist for achieving that figure and take measures to mitigate them. “Of course, the whole world is currently in a very unstable period where there are many risks both security-related and economic. Value chains and logistic chains are disrupted globally. And this causes a big problem especially for a landlocked country like Armenia. Thus, the government is taking measures to help Armenian businessmen to further facilitate the process of their exports and imports. There are quite big risks, but our task is to be able to skillfully manage those risks, neutralize them if any in order to be able to fulfill the promises given to the citizens”, he stated.

The revenues envisaged by the state budget comprise 2 trillion 301 billion 291 million drams, of which the tax revenues are 2 trillion 203 billion drams. The revenues by the 2022 state budget were 1 trillion 947 billion drams.

“The economic growth in 2022, which will probably comprise 12%, creates very good grounds for us to improve our revenues next year. This is happening also thanks to the increase in economic growth potential and also the improvement of the administration. At the moment we have around 23% taxes-GDP ratio which we are going to improve by 0.5 percentage point”, the deputy finance minister stated.

Vahe Hovhannisyan also talked about the state debt, stating that the debt in dram terms will decrease, 70% of the debt is in foreign currency, and the dram has been appreciated. “If when planning the budget of 2022 we were expecting to have a debt of 4 trillion 740 billion drams, we plan to have a debt of 4 trillion 627 billion drams at the end of 2023”, he said.

But it doesn’t mean that new debt funds will not be borrowed.

“Of course, we will borrow new debt funds as we have many programs, including infrastructural, which are being implemented by a foreign funding, in other words, by credit funds. We also implement budget support credit programs aimed at improving the policies. And of course we have plans to take a new debt”, he said.

The 2023 state budget draft still needs to be debated at the joint session of the Parliamentary Standing Committees and then during the Parliament’s plenary session.

Interview by Anna Grigoryan

Photos by Mkhitar Khachatryan