RA Finance Ministry: By the end of 2022, government debt will decrease by 0.6 p.p. - from 60.8% at the end of 2021 to 60.2%

ArmInfo.The borrowed funds next year will be used exclusively to finance capital expenditures for development, Armenian Minister of Finance Tigran Khachatryan said  on November 17 in parliament presenting the draft law "On the state  budget of the RA for 2022"

According to the head of the Ministry of Finance, the Armenian  government attaches particular importance to maintaining  macroeconomic stability, in connection with which the draft state  budget for the next fiscal year prioritizes programs aimed at  ensuring this task. As the minister pointed out, these programs are  based on the following main approaches: the creation of such  macroeconomic conditions that will become "fertile ground" - will  contribute to high economic activity of the private sector and create  conditions for 7% economic growth by the end of the year. The  financial authorities also plan to reach 7% GDP growth as a result of  large financial investments in infrastructure projects. According to  Khachatryan, capital expenditures of the state budget for 2022 will  amount to about 357 billion drams, or 4.5% of GDP, which is 60% or  more than 130 billion drams higher than the target for 2021.

At the same time, the RA government, represented by the Ministry of  Finance, claims that "in 2021, the Armenian economy entered the  recovery phase" and in 2021 the economy is expected to grow up to  6.5%, instead of 3.2% set in the state budget. Economic growth in  2021 will be mainly driven by the outstripping growth in the service  sector (including trade) - 8.1%. Industry, agriculture and  construction will also grow - 4.3%, 5.6% and 1.5%, respectively. In  2022, industry will grow by 8%, construction by 18%, and services and  agriculture by 5.9% and 3.9%, respectively. In the context of a  gradual weakening of the negative impact of the pandemic and the war  in Artsakh in 2021, final consumption in real terms will grow by  7.7%, and investments - by 3.6%. In 2022, consumption will grow by  4.7% and investment by 22.5%. The growth in investment will be due to  large government investments in infrastructure projects (an increase  of 46.2%), as well as, as a result of government policy to stimulate  private investment - by 15.6% (both domestic and foreign investment).  This year, exports and imports will grow by 7.6% and 8.2%,  respectively, and in 2022 by 14.3% and 15.3%, respectively.

The GDP deflator will grow by 4.6% (6.8% at the end of 2021),  12-month inflation - 5.2% (7.4% is expected by the end of this year),  and in 2022, average inflation will reach 5.6% (7% expected in 2021).   State revenues and official grants from the state treasury in 2022,  from the 23.6% expected by the end of this year, will grow to 24.7%  of GDP, tax revenues and duties will increase from 22.5% to 23.4% of  GDP.  State budget expenditures, instead of 28.2% expected at the end  of this year, will decrease to 27.8% of GDP, and current expenditures  will also decrease - from 25.1% to 23.45 GDP.

In particular, expenditures compared to the approved budget for the  current year will grow by 18.2% or 337.5 billion drams - up to 2  trillion 188.4 billion drams, which is about 204 billion drams or  10.3% more than the adjusted expenditure budget for 2021 year, or  about 340 billion drams more than the target for 2021.

Of these, 1 trillion 843 billion drams, or 81 billion drams (4.6%)  more than the target for the current year, will be directed to cover  current expenses. Thus, as the head of the Ministry of Finance  pointed out, current expenses will not exceed tax revenues. At the  same time, as Khachatryan assured, the borrowed funds will be used  exclusively to finance capital expenditures for development, "he  assured.

According to the draft budget for 2022, the revenues of the state  treasury of Armenia, compared with the approved state budget for  2021, will increase by about 289 billion drams, or 17.5% - 1 trillion  946.2 billion drams. It is planned to significantly increase tax  revenues. In 2022, they are projected at the level of 1 trillion  843.8 billion drams (up to 23.4% of GDP), which is 263 billion drams  or 16.5% more than the indicator approved by the revised budget plan  for 2021 (1 trillion 581.0 billion drams, 22.5% of GDP). The minister  recalled that tax revenues (tax collections and state duties) in 2021  were fixed at 1 trillion 440 billion 136 million 839.5 thousand  drams. Thus, tax revenues in 2022 are expected to be 0.9 percentage  points higher than the 2021 level. Moreover, tax revenues in 2022  will exceed the level of the pre-crisis tax revenues in 2019 by 380  billion drams (about $ 770 million, the estimated exchange rate of  the Armenian dram to the US dollar is 493.6 AMD /$ 1.). Thus, 94.7%  of all state budget revenues will be provided by tax revenues, 1.8%  by official grants and 3.2% by other revenues. Official grants, which  Armenia is applying for next year, will amount to about 40.3 billion  drams, or approximately 81.6 million US dollars, against 24.3 billion  drams provided by the state budget for the current year and actual  12.4 billion drams last year. The size of the state budget deficit  will be reduced to 243 billion drams or 3.1% of GDP from 4.7% of GDP  expected by the end of 2021.

At the same time, the financial authorities assure that in 2022 there  will be a return to the logic of the "golden rule" of public finance  established by fiscal rules, which will create a solid foundation for  long- term high economic growth, ensure a stable decrease in the  debt-to-GDP ratio and improve the spending structure. "Due to an  increase in tax revenues, a return to the rules for managing  expenditures and a safe level of deficit, which should not exceed  3.1% of GDP, significant fiscal consolidation will be carried out in  2022 and the issues of government debt management will be  significantly improved," said Tigran Khachatryan.  In particular,  according to the head of the Ministry of Finance, during 2022 the  government debt in relation to GDP will decrease by 0.6 percentage  points - from 60.8% at the end of 2021 (63.5% of GDP in 2020) to 60.  2% projected by December 31, 2022. The debt structure will be  significantly improved, with an increase in the share of monetary  indebtedness and reduced foreign exchange risks. In particular, in  2021- 2022, it is planned to increase the share of government  treasury bonds in drams in the structure of government debt, which,  according to forecasts, will be 2.9% and 2.6%, respectively. At the  end of 2022, the share of domestic debt will increase by 2.4% to  30.7%. In parallel, as the head of the Ministry of Finance assured,  work will continue to improve the efficiency of expenditures.