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YEREVAN, DECEMBER 17, ARMENPRESS. World Bank country manager for Armenia Carolin Geginat presented the Armenia Public Finance Review Enhancing Fiscal Policy Efficiency during an official presentation on December 17.
According to the report, fairer taxes and investments in quality education and learning outcomes can help Armenia in achieving its targets in revenues, education and sustainable development.
“The public finance review is one of our main knowledge products. The World Bank prefers to call itself a bank of knowledge, because we like not only to give money, but knowledge, thus, one of such tools, such as the Armenian public finance review, is a very important tool that we provide to the stakeholders. States use these tools to learn, to get informed about the experience of other countries and make decisions also based on studies conducted through our independent tools,” Geginat said.
“The government of Armenia adopted an ambitious five-year program (2021–2026) to support inclusive growth by various means. The program is built on six pillars, one of which focuses on human capital development and envisages: (i) providing affordable, high-quality healthcare services and introducing universal health insurance in Armenia, where out-of-pocket expenditures are among the highest in the world; (ii) improving the coverage and targeting of social assistance programs as well as increasing pensions; and (iii) improving education outcomes by modernizing the curriculum, upgrading infrastructure, and strengthening the links between education and the labor market. vi. Realizing this ambitious program requires boosting revenue collection as well as improving spending efficiency and service delivery outcomes. In this context, it is important to improve the effectiveness and efficiency of the fiscal system, as well as its ability to support broader developmental objectives tied to the country’s economic plans,” reads the 2024 review.
The review notes that Armenia has a reasonable tax to GDP ratio that has increased in recent years and which the government plans to raise further. Thanks to tax policy and administration reforms, revenue collection increased from an average of around 21.2 percent between 2014 and 2019 to an average of 23.5 percent over the last three years (2021–2023). The government’s Five-Year Plan (2021–2026) set a tax to GDP target of at least 25 percent by 2026 and aims to improve the competitiveness of the business environment through tax policy reforms.
Armenia can improve the efficiency, equity, and sustainability of its tax system through a revenue-positive tax policy reform package, it added.
In terms of education, the review notes that despite high enrollment rates in general education within Armenia, there is room to improve learning outcomes.
“Armenia can improve its educational outcomes even at the current level of expenditures by enhancing spending efficiency. A cross-country data envelope analysis (DEA) suggests that while the efficiency of public spending on education in Armenia is better than that of its regional neighbors, it remains below the efficiency frontier. Armenia could increase its learning-adjusted years of schooling by 14 percent with its current expenditure levels, which would translate to a substantial increase in educational outcomes. After accounting for school size, location, and per student expenditures, the results show that the average school in Armenia has an efficiency score of 0.53, while schools in the 20th and 80th percentile have efficiency scores of 0.29 and 0.75, respectively. This large variation in technical efficiency within Armenia suggests that improvements can be achieved with the current level of school expenditures,” the review stated.
The review recommends that pre-primary education coverage and systemic inefficiencies should be addressed; The sustainable implementation of the new curriculum reform will help to enhance learning outcomes; Improvements in the national student assessment system and school funding formula need to address the education outcome challenges; The introduction of school networks will help address some of the inefficiencies in small schools; Improving teachers’ salaries and investing in the professional development of teachers will help make the teaching profession more attractive; Enrollment in both vocational and higher education can be expanded through targeted interventions, improved financial aid programs, and ensuring the connection with labor market needs.