Financial regulator sees the need to create a solid foundation for  increasing capital expenditures

ArmInfo. On June 5, Chairman of the Central Bank of the Republic of Armenia Artur Javadyan presented the conclusions of the Central Bank of the Republic of Armenia on the implementation of the 2019 state budget during a meeting of the  Parliament of the Republic of Armenia. First of all, Javadyan  emphasized that the implementation of the budget in 2019 contributed  to the sustainability of the public debt. In this vein, he said that  the ratio of debt to GDP in y-o-y terms decreased by 1.3%, amounting  to 50%.

"The reduction in the ratio of debt to GDP was facilitated by the  reduction in the budget deficit, which is higher than forecasted for  the year, which was due to the improvement in the implementation of  state expenditures, including the constant revision of this indicator  by the government and in order to increase the efficiency of their  implementation," said the head of the Central Bank, noting that tax  administration also affected the decrease in public debt. At the same  time, he added that in the context of a restraining fiscal policy,  the state budget deficit amounted to 41.4 billion drams, or 1% of  GDP, which had a restraining effect on gross demand.  According to   Javadyan, in the context of a restraining fiscal policy, the Central  Bank responded to inflationary developments by continuing to pursue a  stimulating monetary policy by lowering the refinancing rate twice.   Keeping low interest rates, which was accompanied by an increase in  lending to the economy, contributed to the growth of gross demand.  <As a result of the formation of economic growth in 2019, domestic  spending contributed to a greater extent, especially a significant  increase in private consumption - by 12.8%>, - said the head of the  Central Bank.

At the same time, Javadyan drew attention to the fact that in the  context of high economic growth rates and the introduction of  amendments to the Tax Code, the government revised the budget program  in the direction of growth.  As a result, he stressed, revenues to  the state budget increased by 16.7%, and in terms of taxes and  duties, growth was registered at 16.4%. At the same time, a  significant improvement was recorded in terms of the ratio of taxes  to GDP - by 1.3%, amounting to 22.3%. Regarding expenses, the head of  the Central Bank noted that compared with the previous year, state  budget expenditures increased by 12.6%, covering a share of 24.9% in  the structure of GDP.  The ratio of capital expenditures to GDP, he  said, was 2.9%, which still remains below the target in the medium  term.

"Based on the abovementioned and understanding the impact of capital  expenditures on maintaining GDP growth, it is most important to pay  special attention to solving problems in the field and creating solid  foundations for increasing capital expenditures," Javadyan stated.   Summing up, the Chairman of the Central Bank noted that the changes  made in the fiscal policy in 2019, which were mainly reflected in the  reduction of the state budget deficit, the reduction of the shadow  and the reform of public spending, had a positive effect on  maintaining macroeconomic stability and the stability of the public  debt. 

"Under the conditions of macroeconomic stability, it is very  important to ensure the implementation of the necessary capital  expenditures to strengthen the foundations in order to ensure stable  economic growth," he concluded.