The government has approved the draft law of the Republic of Armenia "On the State Budget of the Republic of Armenia for 2024".
The draft law on the State Budget of the Republic of Armenia for 2024 was presented by Minister of Finance Vahe Hovhannisyan. "We are approving the budget in such an environment when we have tens of thousands of displaced compatriots; we must provide them with the necessary primary care and, in the medium term, ensure a dignified life in the Republic of Armenia. At the moment, without having a clear idea about the number of people who want to move to Armenia, we have set a separate line in the budget for people forcibly displaced from Nagorno-Karabakh, where we have initially planned 10 billion drams, the amount of which we will increase in the next stages of the budget discussion if necessary.
According to the minister, new risk management approaches were laid at the basis of the development of the state budget, arising from the current turbulent world and the great uncertainty derived from the events taking place in the region. "Under these conditions, we are consistently improving our forecasting tools. Based on them, we create a number of scenarios, one of which is selected as the basis of the state budget. The other scenarios make it possible to quantitatively assess the risks and form reserves based on them, which should be a financial security cushion in the event of the materialization of the main risks, as well as the appearance of unforeseen costs.
Despite the difficult challenges, to the joy of all of us, it should be said that the economy of Armenia has shown and continues to show quite high resilience, including thanks to the effective macroeconomic policies and adequate actions implemented by the RA government and the RA central bank.
Thus, rates of economic growth and activity continue to be high. The double-digit economic growth was maintained during this year as well. 10.5% economic growth was registered in the first quarter, and 10.4% increase in the economic activity index in January-August. Under these conditions, the economic growth of 2023 is predicted within the framework of the 7% targeted by the RA government and may be more if the current trends are maintained. In 2024, we also aim to achieve 7% economic growth and improve the Tax/GDP ratio by around 0.75%, as a result of which tax revenues will amount to 2.566 billion drams, being 342 billion drams or 15.4% more than the tax revenues of the revised budget of 2023.
Although a significant portion of the economic growth has been provided by the services sector, the growth has been widespread, showing up in almost all sectors. Moreover, qualitative changes have taken place in the economy, increasing the potential of the RA economy.
It is important to note that economic growth, in line with the policy announced by the RA government, was inclusive. High economic growth was accompanied by an increase in employment on one hand and, on the other hand, by an increase in average wages significantly exceeding the rate of inflation. In January-July 2023, the number of hired workers continued to increase, recording a 6% growth, and the average monthly nominal salary increased by 18.5% compared to the previous year, reaching 262,591 AMD. The real salary increased by 18.7% in conditions of -0.2% inflation. We expect that the positive trends in the labor market will continue in 2024, contributing to the increased well-being of our society.
This budget continues the policies implemented in previous years. It is the 3rd Budget of the Government Plan 2021-2026 and aligns with both the priorities of the Government Plan and the Medium Term Expenditure Plan approved in June.
Expenditures will amount to 3 trillion 17 billion drams, exceeding the 2023 adjusted budget expenditures by about 415 billion drams or about 15.9%. Capital expenditures will amount to 695 billion drams, exceeding the capital expenditures of 2023 by 126 billion drams or 22%.
To achieve these indicators, it is imperative to address tax administration and policy gaps by enhancing the capacity of the state budget. Counteracting the devaluation of the dram and the subsequent decline in export sector price competitiveness requires targeted support instruments. Measures aimed at promoting exports, implementing large private investment programs, and attracting private investments are crucial. Additionally, reforms to enhance the efficiency of the state system, including public administration reforms and digitization, are essential. The establishment of a state investment management system is also a key component.
Adequate measures have been outlined in all these areas, and if necessary, additional measures can be implemented based on the situation.
Notably, I would like to highlight the programs of particular significance in the budget.
The expenditures of the Ministry of Defense of the Republic of Armenia total 555 billion drams, reflecting an increase of 37.7 billion drams or 7.3% compared to 2023.
The proposed budget for the Ministry of Energy and Mineral Resources is 311.6 billion drams. In terms of key priorities, major repairs are planned for 100 km of interstate, 110 km of national, and 130 km of regional highways, along with 8 transport facilities. Additionally, there are plans for 107 km of average repair, 4,074 km of summer maintenance, and 4,841 km of winter maintenance. The budget will also cover maintenance and operational activities for 3 tunnels and 5 bridges, totaling about 75.6 billion drams.
Construction works will be carried out for the implementation of the North-South Road Corridor Development Project: Kajaran-Agarak 32 km section, Ashtarak-Tallinn 8 km and 34 km. It is planned to start the construction and overhaul works with around 39 billion drams: Sisian-Kajaran 60 km road, Sisian-Kajaran 60 km, subway of Kajaran, construction of Gyumri bypass road.
In the water sector, construction works on small and medium-sized reservoirs will continue, including project estimate documents will be obtained for 6 reservoirs, technical and economic studies will be carried out on 9 reservoirs, construction works on 3 reservoirs will begin, rehabilitation and re-equipment works on 1 reservoir will begin, worth about 2.3 billion drams.
The construction and reconstruction works of settlement water basins will start for 30 days, with 2.7 billion drams.
In 2024, there are plans to allocate 1 billion drams for the reconstruction of the linings of a 234-square meter section of the Arpa-Sevan water system tunnel. This initiative aims to enhance the technical condition of the water system.
Subsidies given to communities will amount to 22.5 billion drams.
The draft state budget of the Ministry of Economy for 2024 amounts to 92 billion drams, which is 27.4 billion drams or 41.9% more than in 2023. Here we have new initiatives: 300 million drams for the development of industrial crab farming, 1.1 billion drams for the development of greenhouse farms, 500 million drams for the modernization of the quality infrastructure system, 700 million drams for support measures in the textile sector, and a state support program for issuing and rating: 300 million drams, pharmaceutical industry development program: 300 billion drams, WB-supported Tourism and regional infrastructure improvement program: 5 billion drams, within the framework of which the formation of tourist clusters is planned.
The draft state budget of the Ministry of Labor and Social Affairs is 745 billion drams in 2023. compared to 91.5 billion drams or 14% more. Among them, according to the key directions, the provision of refunds to pensioners from non-cash payments will continue, and the average annual number of users will be around 162 thousand pensioners. Moreover, in 2023 For 2 billion drams, we have planned 7.6 billion drams. About 680 million drams have been earmarked for capital expenditures for the reconstruction, overhaul and design budget works of 12 care centers. Assistance to persons with disabilities within the framework of the program in 2024. the amount of personal assistant services for 189 beneficiaries is planned in the amount of around 150 million drams. In the field of pension security in 2024 necessary funds were calculated, keeping the 2023 the standards defined by the changes made after July 1, whereby the minimum pension is 36,000 drams. Expenditures for pensions will amount to 326 billion drams, allocations for old-age benefits - 45 billion drams, and expenses for family benefits - 30 billion drams.
The draft state budget of the Ministry of Health is 168 billion drams, which is 26 billion drams or about 18.4% more than the approved budget of 2023. From this increase, 18 billion drams have been earmarked for the purpose of implementing the comprehensive health insurance system as an undistributed amount, which will be distributed during the year after the decisions related to the implementation of the system are made. AMD 8.1 billion was distributed and directed to the expansion of services and beneficiaries within the framework of a number of programs in the health sector. In particular, the range of beneficiaries receiving medical care and services with the use of assisted reproductive technologies within the framework of the state order was expanded, in order to continuously improve oncology services, the prices of surgeries were revised, the cases of radiation treatment were increased, the list of chemotherapy drugs was expanded, the limitations of the average degree of functionality were changed and the 3rd the amount of 50% reimbursement of drugs provided by the state through outpatient primary care for people with disabilities, which has become 100% free for about 110 thousand beneficiaries, as well as the list of diseases in which medicines are allocated to about 500 beneficiaries with full reimbursement of their cost.
The draft state budget of the Ministry of Education, Culture and Science is 345 billion drams, which is 95 billion drams or 38% more than in 2023. Among them, according to the key directions, 111 billion drams have been planned for the construction, overhaul, repair and provision of property for 300 schools and 500 kindergartens, compared to 38.7 billion drams in 2023. Regarding the financing of public schools, 107 billion drams have been planned, compared to 99 billion drams in 2023, due to the transition of the latter's funding by grade-number. 2.3 billion drams have been planned for providing students of educational institutions with textbooks and educational literature.
Finally, I would like to mention that the budget deficit will amount to around 340 billion drams or 3.2% of GDP, resulting in a debt/GDP ratio of 48.4% at the end of 2024. Maintaining the debt at such a level provides an opportunity to sustain the positive trends of the RA government's rating, create an additional "stability reserve" to withstand possible future risks, and maintain a manageable level of interest payments against the debt from the budget that does not compromise the necessary development expenses," said the Minister of Finance.
Referring to the state budget draft, Nikol Pashinyan noted that it will be discussed in more detail in the parliament. "Dear colleagues, I want to highlight the data on the growth of the revenue part of our budget after 2018. In 2019, compared to 2018, the revenue part of the budget increased by approximately 400 million dollars. In 2020, compared to 2018, it increased by around 800 million dollars. In 2021, compared to 2018, the revenue part of the budget increased by around 556 billion drams. Let's put it at roughly $1 billion and a little over. In 2022, compared to 2018, the revenue part increased by 794 billion drams, which can be considered to be about 2 billion dollars. In 2023, we expect approximately $3 billion more income than the budget of Armenia had in 2018. And for the planned year of 2024, which, of course, we still have to implement in 2023, an income of about 4 billion dollars more than in 2018 is expected. Basically, compared to 2018, the state budget for 2024 has more than doubled," the Prime Minister said.
Nikol Pashinyan also emphasized that the objective of the RA government for this year and the following is to achieve a minimum of 7 percent economic growth. "The 2024 budget also reflects a substantial increase in capital expenditures. I believe that at present, with these capital expenditure volumes, the government's spending efficiency has a more pronounced impact on economic growth. In the past, the influence of government spending on economic growth was considerably lower, and our emphasis was mainly on stimulating the private sector. Now, we should also focus on the quality of our spending policy, as well as collaboration with the private sector to ensure the timely and effective implementation of these expenditures, which drives our economic growth and holds significant economic and political implications," noted the head of the executive.