Wednesday, November 13 2019 15:25
Alexandr Avanesov

Minister: Starting from 2020, the implementation of a tax reform  program aimed at increasing the competitiveness of the country`s  economy will begin in Armenia

Minister: Starting from 2020, the implementation of a tax reform  program aimed at increasing the competitiveness of the country`s  economy will begin in Armenia

ArmInfo. In 2020, Armenia will begin implementing a program of tax reforms that are aimed at improving the competitiveness of the economy by easing the tax  burden. This was announced on November 13 from the rostrum of the  National Assembly of the RA Minister of Finance Atom Janjughazyan,  who introduced the draft law "On the State Budget of the RA 2020".

According to the minister, another feature of the country's main  financial document will be a significant increase in capital  construction costs. So, if in 2019 the volume of capital expenditures  amounted to 2.8% of the country's GDP, then in 2020 it is planned to  bring this figure to 5%. Also, 2020 will be characterized by  significant government investment in the development of human capital  - education, science, culture, sports, social services, and  healthcare. And if we make comparisons with the volumes of financing  of these areas in 2019, it is easy to notice that the volumes of  financing the healthcare sector will increase by 22%, education - by  11%, and the same amount by the social sector. It is also planned to  reduce public debt, which by the end of 2020 will be less than 50% of  the country's GDP. 

For the first time in 2020, loans for budget assistance will not be  attracted, financial credit resources will be allocated for the  implementation of targeted programs. The risks associated with the  refinancing of public debt will also be reduced, which was the result  of the placement of Eurobonds in September this year.

This, as Janjughazyan noted, will provide an opportunity to reduce  the burden of servicing the public debt in the next fiscal year.  Measures will also be taken to increase pensions and wages, improve  the demographic situation in the country. Appropriations are also  planned to solve housing problems of socially disadvantaged sections  of the population and military personnel.

Earlier, during a hearing in parliamentary commissions, the minister  said that when developing the draft state budget of Armenia in 2020,  many factors were taken into account, including external challenges  that could affect the growth of the country's economy. 

According to him, in particular, it is forecasted that in 2019 the  growth of the world economy will amount to 3.2%, and in 2020 - 3.5%.  At the same time, the processes taking  place in China will continue  to have a significant impact on the  global economy, including the  Armenian one. This year, it is  forecasted that China's GDP will be  6.2%, and next year - 6%.  Situation in partner countries will  continue to play not least in the development of the country's  economy. In particular, in 2019,  Russia's GDP growth is projected at  1.2%, and next year - 1.9%. In  the European Union, it is expected  that in 2019 the growth rate of  the EU economy will increase by  1.3%, and next year - by 1.6%.

These indicators, according to the head of the Ministry of Finance,   are also recorded in the medium-term spending program for 2020-2022.   At the same time, the indicators of the program for 2020 were   reflected in the draft state budget of 2020, which is preliminary.   The Minister recalled that the high growth rates in 2019 were   achieved, mainly due to the growth in industry and services. In this   context, Atom Janjughazyan pointed out the importance of changing   sectoral structures, which will lead to an increase in the export   potential based on high technologies. "We need profound changes in   the structure of the economy," the minister said, recalling the   projected GDP growth of the country in 2019 to 6.3%. In this context,   he emphasized the need to "stabilize growth within the existing   potential", so that economic growth is accompanied by increased state   capacity, sustainable development and maintaining macroeconomic   stability.

It is envisaged that in 2020 the nominal GDP of Armenia will grow by   approximately 529 billion drams - from 6.566.5 billion drams expected   by the end of 2019 to 7.095.1 billion drams included in the document.    At the same time, the real GDP index will reach 104.9%, against the   forecasted by the end of the current year of 106.3% and actual for  2018 105.2%. The GDP deflator will be 103%, against 102.9% for 2019   and the actual 102.5% for 2018. According to the project, the state   budget revenue item will be 1,697,618,538.8 thousand drams (1.69   trillion drams or $ 3,566 billion), the expenditure one -   1,880,186,389.8 thousand drams (1,88 trillion drams or about $ 3.95   billion), the state budget deficit will be about 153 billion drams.    State-owned tax revenues (tax revenues and state duty) are projected   at 1.602.129.712.8 thousand drams (1.60 trillion drams or 94.4% of   the projected budget revenues) instead of the planned budget for 2019   1,401,875,600.6 thousand drams, and official grants are expected to   be 33.8 billion drams (against 39.5 billion drams for 2019), other   incomes - 61.7 billion drams (against 55.1 billion drams approved for   the current year).

At the same time, in 2020, the share of tax revenues by the state   treasury will increase by 0.3 percentage points compared to 2019 - up   to 22.6%. State treasury revenues are planned at the level of 44.6   billion drams, against 39.4 billion drams approved for 2019 and   actual 37.7 billion drams for 2018. In 2020, according to the draft   budget, Armenia expects to receive from foreign states and   international organizations official grants in the amount of 33.8   billion drams, instead of 31 billion drams provided for by the  Medium-Term Expenditure Program (MTEP). This, according to the   authors of the document, is due to both adjustments to the size and   volume of the proposed amounts, and changes in calculations due to   fluctuations in the euro and the US dollar, which were the basis for   the calculation. In particular, the basis for the calculations of the   MTEP was the indicator of 486.42 and 546.54 drams per dollar and   euro, respectively, and the project already made calculations based   on the following rates - 476.17 and 522.03 drams.

In 2020, Armenia expects to receive 7.6 billion drams or 14.5 million   euros within the framework of the European Neighborhood Program for   budget assistance programs provided for by the Armenia-EU Action   Program. 55.1 million US dollars or 26.2 billion drams are expected   under the targeted grant programs. Of these, $ 10.7 million or 5.1  billion drams will be received from Russia, from the EU grants in the   amount of $ 13.1 million or 6.2 billion drams, $ 7.1 million or 3.3   billion is expected to be received from KFW under grant programs   drams, $ 2.4 million or 1.2 billion drams will be received from the   Global Fund, $ 8.1 million or 3.8 billion drams are expected from the   European Bank for Reconstruction and Development, $ 1.9 million or   0.9 billion drams from the European Investment Bank for implementing   the North-South Road program (tranche- 3), the World Bank will  provide  grants in the amount of $ 2.8 million or 1.3 billion drams  and  another $ 9 million or 4.4 billion drams expected from other  donors. 

Armenia plans to receive 61.7 billion drams from other incomes in   2020, 30.6 billion drams from them through extrabudgetary programs,   against 55.1 billion drams for the current year and 72.4 billion   drams for 2018.

Repayment and servicing of the government debt of Armenia in 2020   will cost the state treasury $ 1.355 billion. At the same time, as   expected, the nominal GDP in the conditions of 4.9% of economic   growth will increase by approximately 529 billion drams - from   6.566.5 billion drams expected by the end of 2019 to 7.095.1 billion   drams or about $ 14.9 billion (the calculated exchange rate of the   Armenian dram to the dollar is 476.17 drams) laid down in the draft   law "On the State Budget of the Republic of Armenia for 2020". Thus,   according to forecasts laid down in the basis of the document, the   state debt of Armenia by December 31, 2019 will amount to 3.538   trillion drams ($ 7.430 billion) or 53.9% of GDP. By the end of 2020,   the indicator will reach 3.705 trillion drams ($ 7.780 billion), or   52.2% of GDP. At the same time, by December 31, 2020, government debt   will amount to 3.490 trillion drams ($ 7.330 billion) or 49.2% of   GDP, thus decreasing by 1.1 percentage points from the expected by   the end of 2019 3.305 trillion drams ($ 6.940 billion) or 50, 3% of   GDP. According to the results of 2020, the debt of the Central Bank   will amount to 214 billion drams ($ 450 million) or 3% of GDP,  against the expected by the end of this year 233 billion drams ($ 490   million) or 3.5 GDP. At the same time, the Armenian financial   authorities plan to increase domestic debt from 780 billion drams or   $ 1,639mln (11.9% of GDP) in 2019 to 12.9% of GDP or 916 billion   drams, $ 1,923mln (against the actual for 2018 672 billion or $ 1,390   million, 11.2% of GDP).

And, if from 2009 to 2016 on average 4.2% of state treasury expenses   were directed to pay interest payments, already in 2017 the indicator   increased to 8.1%. In 2018, interest was paid to pay interest   payments 139 billion drams (instead of the actual ones for 2017,   122.1 billion drams), namely 75 billion drams for external debt and   64 billion drams for internal debt. In 2019, according to the   indicators laid down in the approved budget, Armenia will direct   about 356.9 billion drams ($ 733 million), or 9.6% of the state   treasury expenses, to repay and service the government debt. In   particular, out of 356.9 billion drams, 198.9 billion drams were   planned to be allocated for paying off the main amount of the debt   (85.2 billion drams for external debt and 113.7 billion drams for   domestic debt), and 158 billion drams for paying interest payments.

As a result, according to the document, the repayment and servicing   of the government debt of Armenia in the next year will require 453.9   billion drams (about 953.5 million).  In particular, 284.7 billion   drams (about $ 598 million) of them will be allocated to pay off the   principal amount of the debt (123.4 billion drams will be used to pay   off the domestic debt, and 161.3 billion drams - on the external   debt). About 9% of state treasury expenses or 2.4% of GDP in the   amount of 169.2 billion drams ($ 355.48 million) will be allocated   for the payment of interest payments (85.6 billion drams will be used   to pay interest payments on the domestic debt and 83.6 billion drams   - external).  As a comparison, we note that in 2020 the budget   allocations for education and science will amount to about 160   billion drams, healthcare will receive 110 billion drams.

Armenia should also send about $ 402 million to repay the first   tranche of Eurobonds, which was scheduled for September 30, 2020. The   financial authorities have already decided the issue by issuing the   third tranche of Armenian sovereign securities. On September 19,   Armenia announced the issue of 10-year Eurobonds in the amount of $  500 million, the organizer of the issue opened a order book for $ 500   million with an initial yield of 4.625% per annum. But a significant   prevalence of demand over supply - by more than 5 fold - led to a   decrease in the yield rate to 4.2% per annum, and the coupon rate was   3.95%. The main underwriters were J.P. Morgan Securities plc. and  City bank. The RA financial authorities have already bought out   Armenian liabilities on the first tranche of $ 402 with these funds,   and sent $ 98 million to the Stabilization Deposit Fund.  According   to the results of 2020, according to the source, the World Bank (WB)   represented by the International Development Association (IDA)   continues to remain the largest external creditors of Armenia, which   accounts for 39.4% of external loans and another member of the WB   group - the International Bank for Reconstruction and development   (IBRD). The list of large creditors also includes the Asian   Development Bank (ADB) with 19%, the Eurasian Development Bank (EDB)   - 7.3% and the European Investment Bank with 3.5%. Among the   countries of creditors Russia is the leader - 10.5%, Japan - 4.8%,   Germany - 5.8% and France - 2.9%, followed by China and the USA - in   the amount of 0.5% and 0.3% respectively. 

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Government Bonds

Issue volume

10 billion

Volume of T-bills for placement

200 million

Volume of submitted competitive applications

200 million

Volume of satisfied bids

200 million

Yield at cut-off price

 5.8314%

Maximum yield

 5.8314%

Мinimum yield

 5.8314%

Weighted average yield

 5.8314%

Number of participants

2

The maturity date of T-bills

03.02.2020

ArmEx

 

СПРОС (Покупка)

USD

Средневзв. Цена

482,00

ПРЕДЛОЖЕНИЕ (Продажа)

  USD

Средневзв. Цена

-

СДЕЛКИ

USD

Цена откр.

482,00

Цена закр.

482,00

Мин. Цена

482,00

Макс. Цена

482,00

Ср/взв. Цена

482,00

-0.16

Кол-во сделок

1

Объем (инвал.)

200 000

0бъем (драм)

96 400 000

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