2024 budget performance at risk - Luys Foundation 

ArmInfo. If the trends of the first half of the year regarding the non- fulfillment of budget  expenditure and revenue items continue, the execution of the 2024 state budget will be at risk, and it is possible that this will lead to budget sequestration. 

This is the opinion of the experts of the Luys Foundation, who  analyzed the trends of the Armenian economy for this year. In  particular, as noted in the Fund's message, in 2024, due to the  natural favorable factors that appeared in the RA economy as a result  of the Russian-Ukrainian conflict, the economic activity indicator  was recorded at 10.4%.

, - the  experts of the Fund noted.

In particular, statistical data indicate that the influence of the  above-mentioned favorable factors is gradually weakening. It is no  coincidence that since April there has been a sharp slowdown in the  growth of the manufacturing industry (the of high  economic activity in the first half of the year in the jewelry  industry), as a result of which in the second quarter of 2024,  cumulative growth in the manufacturing industry was recorded monthly,  which is significantly lower than the previous month. 

Moreover, along with this growth, a number of key sub-sectors for the  RA economy (for example, the production of food, clothing, chemicals  and chemical products, etc.) have been recording a decline for  several months. In other words, the growth of jewelry production  (although significantly slowed down compared to the previous month,  but still relatively high) was able to the impact of  this decline, the trends of deterioration in the structure  of the industry.

In general, the of the RA economy, which began at the  beginning of the Russian-Ukrainian conflict, under the influence of  exogenous factors, has received a new impetus in recent months due to  the developments in the jewelry sub-sector. However, it is already  clear that if the neutralization of the aforementioned exogenous  factors continues, the economy will face serious problems. The  experts of the Foundation also touched upon the problems with  the collection of tax revenues of the state treasury. 

Thus, in the first half of 2024, the growth rate of budget revenues  is more than three times less than the same period of the previous  year, which is due to a more than fourfold slowdown in the growth of  taxes and state duties. The total revenues of the RA state budget for  the first half of 2024 amounted to 1 billion 243.7 billion drams and  fell short of the revised estimate by 8%. Tax revenues of the state  budget and state duties for the reporting period amounted to 1  billion 187.6 billion drams (117.4 billion drams less than planned -  ed.), and compared to the revised plan were underfulfilled by 9%.

The total expenditure of the RA state budget in the first half of  2024 amounted to 1,232.7 billion drams, or 12.5% less than the  revised plan. Both current and capital expenditures were lower than  expected. 

Underfulfillment was recorded in the framework of the programs  implemented by all responsible bodies mentioned in the report. In  percentage terms, the most significant underfulfillment is in the  programs under the jurisdiction of the Ministry of High-Tech  Industry, the Statistical Committee, the Foreign Intelligence Service  and the Ministry of Economy. As a result, in the first half of the  year, the RA state budget was executed with a surplus of 11 billion  drams, while it was planned to have a deficit of 56.4 billion drams.  In other words, the budget execution deviated from the plan by about  67.4 billion drams.

from reality.  And this proves that the government has still not managed to solve  the problem of insufficient budget planning skills. Instead, the  report provides various excuses for all the shortcomings  in program implementation: lack of personnel, bad weather conditions,  problems related to the procurement process, procedural problems with  donors, etc.  From studying the expenditures according to the program  classification of the budget, it becomes clear that the current  government has either not implemented a number of programs that are  vital for the Republic of Armenia, or their effectiveness is very  low. Such programs include, for example, , which was not implemented at all, and  , which was  implemented at only 0.6%>, the authors of the study noted.

The Fund believes that if the trends of the first half of the year on  non-fulfillment of budget expenditure and revenue items continue, the  execution of the 2024 state budget will be under threat, and it is  possible that this will lead to budget sequestration. Moreover, the  growth rate of tax revenues, which is two times lower than the  aggregate indicator of economic activity, perhaps indicate the most  serious problems in the RA economy. Meanwhile, experts are sure that  in addition to the fact that tax administration is "limping", the  problem of ensuring the possibility of effective implementation of  key economic programs remains unresolved in the public administration  system in the relevant bodies.