Country Report Armenia November 1998 Main report

Economic policy: First-half budget deficit narrows--

Revised figures from the state statistics department indicate that budget revenue in the first half of 1998 amounted to Dram72.6bn ($144m). Of this, Dram69.6bn was from the central government. Expenditure amounted to Dram88.1bn ($171m), of which Dram85.4bn was for the central government. The budget deficit for the first half of 1998 amounted to Dram15.5bn ($30m) or 5% of half-year GDP.

Budget revenue was up by 58% in nominal terms over the corresponding period in 1997, boosted by a sharp increase in indirect revenue from value-added tax, excise taxes and non-tax revenue. The increase in indirect revenue is a result of more efficient tax collection and new tax laws introduced in July 1997. Expenditure was up by 39.8% in nominal terms over the corresponding period in 1997. Together with external financing, privatisation revenue, which amounted Dram3.6bn in the first half of the year, provided an important source of financing.

--and the social security system is overhauled

The government has announced a major overhaul of the social security system, which will result in slightly higher family benefits and stricter criteria to determine eligibility. The new system, due to be introduced at the beginning of 1999, envisages tougher screening procedures to cut the number of families receiving aid and redirect it to those who need it most. Corruption in the state bureaucracy means that many citizens who are not poor have received aid for years. Criteria such as the possession of a car and the size of monthly electricity bills will help social workers to decide whether a family should be ranked as poor. The huge shadow economy in Armenia means that the government's statistics do not reflect citizens' real incomes. For most of the poor, the monthly benefit will be raised to Dram8,000 ($16).

© 1998 The Economist lntelligence Unit Ltd. All rights reserved
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