Wednesday, March 29 2023 14:17

ArmInfo. The blockade of Artsakh by Azerbaijan causes great damage to the economy of the republic: the total financial and economic losses amount to at least 753 million drams or $1.9 million (395.5 dras per $) per day. This was stated by the former minister of finance of Armenia, international consultant on public finance management Vardan Aramyan, on March 29 in Yerevan, presenting a report "On the assessment of the losses of the economy of Artsakh due to the blockade", prepared by a group of economists commissioned by the government of the Republic of Artsakh and former state minister Ruben Vardanyan.

As Aramyan, who headed the expert group, recalled, it is already the 108th day of Azerbaijan's blockade of the "road of life" - the only road linking Artsakh both with Armenia and with the outside world.The closure of the life path, as the international consultant pointed out, paralyzes the economy of Artsakh, deprives it of the opportunity to supply the necessary resources, turning it into a classic autarchy. And since the economy of Artsakh is small, has no economies of scale and is not self-sufficient, each additional day of the blockade deepens economic losses and increases social tension with a multiplier effect.

<Estimates of GDP losses, additional social spending and budget losses in the line of taxes make it possible to form a comprehensive picture of the socio-economic consequences of the blockade and financial losses in the context of the current crisis. Artsakh's losses are estimated at least 753 million drams a day. At the same time, the longer the blockade lasts, the more the given indicator will increase, since each additional day of the blockade causes more damage to the economic potential of Artsakh, therefore, to the estimated costs, and to their multiplier effect are added the costs of restoring the potential of GDP>, the expert noted.  At the same time, it should be taken into account that the assessment of financial and economic costs or losses includes all types of costs, including losses in public consumption (welfare).

A team of economists made estimates using four approaches using different tools. In addition to assessing economic spending, an attempt was also made to assess the burden of additional social spending, which will inevitably arise as a result of the collapse of the economic system, which is due to unemployment and loss of personal income of the population.

It is noted that in the event of a total closure of the economy and the suspension of enterprises, at least 16.2 thousand people will become unemployed, and the financial compensation necessary to maintain their minimum needs will amount to approximately 36 million drams ($92 thousand) per day (calculated for 1 unemployed person, an allowance in the amount of 68 thousand drams is provided).

At the same time, as noted, the figures displayed in the Report do not include the depreciation of capital assets as a result of unfulfilled necessary expenses and the creation of buffers. However, it is stated that these two factors will cause tangible financial costs for the economy of Artsakh in the future, which can even reach hundreds of millions of dollars.

The authors of the Report noted that the experience of Artsakh over the past two years shows that Azerbaijan regularly intrudes into the economic life of Artsakh, cutting off the supply of gas, electricity, telecommunications, and from December 2022 blocking the "road of life". In order to avoid similar shocks in the future, the Report emphasizes the importance of creating buffers. "Already today, it is necessary to form buffers that, in such cases, will make it possible to minimize the social and economic costs of the Artsakh community. The directions of such expenses may be the creation of additional, alternative energy sources, the formation of essential food stocks and the construction of warehouses necessary for their storage, the formation of fuel reserves and the formation of new infrastructures for their storage, the formation of a stock of essential medicines and storage facilities for their safe storage and so on>,  the document notes.

It should be noted that according to the initiators of the Report, the document was also translated into English and Russian to provide the international community and other interested structures and organizations, pointing out the grave consequences of Azerbaijan's actions for the economy of Artsakh.