ArmInfo. By the end of 2019, Armenia will not "provide" the deficit indicator set in the Law "On the State Budget of the Republic of Armenia for 2019". The Ministry of Finance is inclined to the fact that according to the situation as of December 31 this year the indicator will be much lower than the fixed figure of 151.6 billion drams and will be about 42.5 billion drams (1.6% / GDP). This is stated in the draft state budget for 2020.
So, according to the document, in the context of a restraining fiscal policy at the end of 2018, the budget deficit decreased and instead of the pledged 156.9 billion drams or 2.7% of GDP by the end of December it amounted to 105.4 billion drams or 1.8% of GDP. To finance it, the republic attracted 45.7 billion drams less borrowed funds (new borrowings minus repayments of the principal amount of the debt) than it had planned (179 billion drams). In particular, external borrowings on this line amounted to 85.3 billion ($ 178 million), and 48 billion drams were raised from domestic resources.
Behind the reduction in the deficit budgeted for in the budget are specific credit programs, the implementation of which, although it was taken into account in the budget, did not take place.
Out of the planned budget for 2018 in the amount of 1.527.3 billion drams, 1.446.3 billion drams were realized - unclaimed amounts reached 5.3% or 80.9 billion drams. At the same time, underperformance of current expenses reached 2.9%, and capital expenditures - all 22%. As a result, by the end of 2018, the state debt of Armenia amounted to $ 6922.9 million, having increased over the year by $ 148.3 million instead of the planned $ 372 million. As a result, in 2018 there was a relatively low rate of fulfillment of foreign credit programs - by 50-60%. By March 2019, the Ministry of Finance announced that today Armenia has about $ 1.5 billion of unused amounts, that is, credit agreements to raise funds were concluded, but the funds remained unclaimed.
If during 2013-2018 the share of capital investments in GDP averaged about 3.2%, and in 2017 the indicator grew to 4.3%, according to official statistics, already in 2018, the "shortfall" in capital investments began to gain momentum - by the end of the year it had dropped to 2 ,5%. In 2019, this downward trend continued and in the first half of the year, the ratio of capital investments to GDP fell to 0.9%. According to the budget for 2020, the ratio of the budget capex to GDP is planned to be increased to 5%.
The trend of "shortfall" - "deficit-capital expenditures-public debt" continued in the current year. According to the data for the first half of 2019, state budget expenditures have not been fulfilled by 17.3%. Out of the planned 769.5 billion drams, 636.7 billion drams was spent. Of the capital expenditures provided for the indicated period in the amount of 89.4 billion drams, only 23.5 billion drams were spent. On the whole, of the 220 billion capital investments planned for the current year, by the end of July this year 39 billion drams spent Meanwhile, as the former finance minister of Armenia Vardan Aramyan stated earlier, the strictly conservative approach of the government in the implementation of capital expenditures is probably a positive phenomenon at first glance, since it formally leads to the preservation or reduction of the physical size of the public debt, but in the long term it jeopardizes growth potential. In fact, it is capital investments that provide the maximum multiplier effect for sustainable economic growth, since these funds, budgetary and credit, are directed to infrastructure projects, such as road construction, irrigation and reservoir systems, and the energy sector.
Thus, according to the calculations of the economic team of the "Luys" Foundation, of which "Aramyan" is a member of the coordinating council, non-fulfillment of capital investments in the amount of 1.1% the potential for GDP growth by 0.3 percentage points. That is, if in 2019 the non-fulfillment of capital investments reaches about 65 billion drams (or in the amount of 1.1% of GDP), then this year the economy will grow by 1.1 percentage points below the planned level. In subsequent years, regardless of the level of investments made, annual GDP growth rates will be lower by an average of 0.3 percentage points.