The National Assembly began the discussions of the 2007 State Budget and signed a document, which Prime Minister Andranik Margaryan called a “wonderful document”.
The journalists weren’t able to ask questions to Margaryan about the “wonderful document”. Instead, RA Minister of Economy and Finances (MoEF), Vardan Khachatryan had the privilege of doing that. He presented the main provisions of the budget – 9% GDP growth, up to 4% inflation, 68,3 billion AMD deficit, etc. Although the budget anticipates activation in the fight against crimes, improvement of tax and customs system and many other beautiful improvements, nevertheless Khachatryan was more modest about his estimations than Margaryan. The Minister of Finances refrained from reciting “wonderful” and similar other words. He just said that “this is the state budget draft of 2007”.
That draft contains a very interesting prediction as well. Next year export will grow by 16% and the import by 13.5%. The head of the People’s Deputy faction, Karen Karapetyan was curious about the preconditions of such an opinion in the event when exportation rates are really low due to dollar devaluation. By judging the same budget draft next year this process will continue, since 1 USD is foreseen to cost 357 AMD.
“Perhaps this will be the last year for us to predict currency rates,” said Khachatryan and clarifying that publicizing predictions creates negative impulses and stimulates the further revaluation of the AMD. Khachatryan informed that in the future, all the calculations will be done based on the rate of the given day. The Central Bank and the government will base everything on the rate of the given day during transactions. In the event of changes the damage will be reimbursed by taking money from the budget.
Regarding the slump of exportation Khachatryan said a few interesting things. The Minister is sure that the pending processes will have a positive outcome. “The AMD revaluation enables investment of new technologies. That’s an additional stimulus for producers to apply new technologies. It wouldn’t be possible to permanently stay competitive at the expense of low manpower. Sooner or later we’d encounter this.”
Karapetyan didn’t quite agree with this opinion. In his opinion, revaluation is a positive process, “however after a while it becomes dangerous.” The Deputy also opposes when some people calmly say that the non-competitive companies will be liquidated and thinks that we should think over a little more at least for the reason that the deficit of foreign trade gradually increases.
In this regard, the ideas of Khachatryan were more interesting. “Our indices are not bad at all. The negative balance of our trade is only 5-6% of the GDP. Many countries would dream of such an index,” persists the Minister.
It’s hard to tell who’s thinking about what and which country is jealous of Armenia. However, the index noted by the Minister of Finances is rather suspicious. According to the data of the National Statistic Service the GDP of January-September of 2006 in Armenia amounted to 1 trillion 720 billion AMD. If based on the current USD rate – 380 AMD, the GDP of the nine months of 2006 amounted to approximately 4,5 billion USD.
During the same period the exportation amounted to 699,4 million AMD and importation – 1 billion 508,7 million USD. The negative balance amounts to nearly 800 million USD. By applying simple math it’s possible to calculate the percentage of 809 million to 4,5 billion. It comes up to 18%. Let’s add that the foreign trade, without counting the diamond, also forms this number. It would be interesting to know about the countries, which dream to have such an index. Nevertheless, Khachatryan thinks that the large deficit of foreign trade is not that horriblel. “I don’t even think that Armenia may ever have a positive stride towards foreign trade, that is – more exportation than importation,” thinks the Minister. With all the mentioned points combined Khachatryan finds it possible to have 16% exportation rate next year. However, it’s worth remembering the promises given for the current year but as you see, not many of them are kept.
The talks, according to which the revaluation of AMD harms Armenian economy, Khachatryan finds them uninteresting. “This government is the only government that has clearly defined what it considers a priority until 2015 and keeps following them point by point. Among priorities is poverty reduction. That is the reason why we prefer inflation,” said Khachatryan. “In order to devaluate the AMD rate the state has paid about 250 million USD in order to slow down the course of devaluation of AMD. However its maintenance is unacceptable for us because our defined priorities will change.” According to Khachatryan there is also the third way – “we should stop economic growth,” which will hardly take place.
The Minister of Finances adverted experts who criticize the USD deflation and its consequences. Khachatryan thinks that they are good experts and many of them work at international organizations. This means that they earn salaries in USD or Euro, thus AMD revaluation harms them. The Minister wishes that those experts don’t blame the people for the Euro they lose. They don’t understand what they’re getting into. They enter such spheres, where they have never been before and will hardly be in the coming one hundred years.
Let’s just add that unlike other statesmen, Khachatryan didn’t mention journalists among the ones, who earn their salaries in USD.