Thursday, November 18 2010 18:54
Armenian Central Bank: Government policy of state budget fulfillment in 2011 must be based on key provisions of mid-term spending program
ArmInfo. The Government policy of state budget fulfillment in 2011 must be based on the key provisions of the mid-term spending program, Head of the Armenian Central Bank (CB) Arthur Javadyan said in the parliament on Thursday presenting the CB's resolution on the draft budget for 2011.
In particular, he said, it is necessary to ensure annual growth of the share of taxes in GDP by 0.3-0.4 points that will lead to gradual reduction of the budget deficit. He believes that the provisions in the budget for 2010 related to tax collections and social payments are certainly minimized, which ensures the growth of the ratio of taxes to GDP by 17.1 points versus 0.3% in 2009. In this light, the indicator 17.3% envisaged for 2011 is minimized as well to ensure the growth versus 2010 by some 0.2 percentage points. The chief banker welcomes the government's intention to cut budget deficit that will allow sustainable development of Armenia's economy in the mid-term outlook without any significant growth of the external debt. The envisaged measures will also allow fulfilling the anticipated 4%+/-1.5% inflation. A. Javadyan said that thanks to gradual improvement of the macroeconomic situation as a result of global economic recovery, economic growth in Armenia for 8 months of 2010 totaled 3.1% versus 18.4% decline for the same period of 2009. Upward trends emerged yet at the beginning of the year, which created favorable environment for tax collection and reduction of the budget deficit. At the same time, foods rose in price in 2009 in the global markets also because of unfavorable weather. In fact, in early 2010 inflation environment in Armenia was rather high in Armenia.
Nevertheless, in such situation the Armenian government's policy of anti-crisis measures grew into well- weighted monetary policy that prevented additional price loads and enhanced economy. In particular, by the data for 8 months of 2010, tax collection totaled 24.9 billion drams, compulsory social payments - 1.6 billion drams, which exceeds the indicator for the same period of 2009 by 20.9% and 14%, respectively. In fact, in 2010 state budget deficit was reduced.
The Central Bank increased the refinancing rate by 2.22% for Q1 2010. In fact, inflation fell to 5.8% in June. However, unfavorable weather that resulted in growth of global prices for grain and other basic foods starting the second half of 2010 boosted inflation processes. Nevertheless, Javadyan said, maintenance of the coordinated monetary and taxation-and-budgetary policy in 2011 will allow retaining the downward inflation trends to 4%+/-1.5%. In such case, high economic rates will be retained as well.
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