– During the 8 months of this year the budget collected 300 billion dram instead of the planned 727 billion taxes and other related payments. Four months have remained till the end of this year, do you hope that it is possible to collect the rest of the planned money during these four months?
– Everyone knows that we have a scenario, which has strayed from economic development. We had a scenario of GDP development, but now the economy is falling at the rate of 18%. Thus, we will not be able to collect this 727 billion dram. The government is trying to keep the ratio of taxes and GDP at the planned level for 2009 (17,4%). Now this ratio exceeds 20%, but we should view this rate from the point of view of the annual results. I think that if the government manages to keep this ratio at 17,4% it will be great. It means that the tax services have done their best and the reason of reduction of tax collection was the economic slump.
– In the beginning of the year expenses worth of 131 billion were replaced to the fourth quarter, but now it becomes clear that these expenses will be delayed. Isn’t it sequestration the government has been talking about?
– The rumors that the government has committed a sin and has done hidden sequestration are not true. The budget law writes that the government may change the expense proportion, and any time in the year it can change the expense proportion for the quarter. In 2003 the law on budget system was amended as recommended by the IMF and WB, according to which the government has the right to cut down the budget expenses by 10%. It is the first year that this provision is in force. At that time none of us clearly understood what law we were going to approve. The government removed the income capacity of 131 billion to the fourth quarter, thus it is natural that together with the incomes it should also replace the expenses. However it replaced less expenses amounting to 92 billion. We have covered the lack of 40 billion dram with the free pending amount of 80 billion. During the crisis the government brought up two very important goals: not to cut down any social programs and drive the financial management in a manner not to collect inner expenses. The sequestration is done for the purpose of not collecting inner expenses, but it is done when the cut down expenses exceed 10%. They say if the government makes sequestration, it should resign. Resignation is real only in one case; when the budget is not adopted. In case of sequestration there may be resignation too, however it should be proven that it is a result of the government’s bad work.
– Why does the government take huge borrowings, increase the foreign debt but does not cut down the expenses by more than 10% in order not to do sequestration?
– What is the pleasure of sequestration?
– Why did you suspend expenditure amounting to 92 but not 100 billion? We need more money.
– Because it is the 10%, if we tried to take more than 10%, we had to get the parliament’s approval for that. Plus, we did not need 100, because we could fix everything. If we tried to take 100, we had to do sequestration. This number has not been taken by chance. We have calculated and come to the conclusion that we had to suspend the expenditure of 92 billion dram. The 10% is equal to 94 billion.
– What expenses did you cut down?
– We reduced the expenses on gas, vehicle maintenance, business trips, representation, administrative and other related expenses. Besides that, we decided to suspend the planned overpayment equaling to 26, however at a later stage we decided to leave the 15 million.
– Is it possible that other expenses may be cut down till the end of the year too?
– If it turns out that less tax incomes are collected, and we can make expenses, then it is possible. However we have taken borrowings and I don’t think it may happen.
– What was the impact of the USD depreciation by 60 dram in March on the budget implementation?
– We can’t say whether there will be load on expenses as a result of the US dollar price changes. In case of receiving incomes in USD we are benefiting. However when we are paying credit interest fees, the price is higher. About two years ago I calculated that the variation of 40-50 would equal to the circulation of 700 million dram, which was a very small ratio compared to the budget and was not risky. In this case we have not done any calculations.
– What principles are there in the base of the 2010 budget? For example, what GDP growth or inflation rates do you foresee?
– These ratios are not clear yet. In the budget of 2009 we had an expense part of 942 billion, 92 billion out of which was suspended. Now we have to deduct 92 billion from that amount this year too.
– It will be a very optimistic budget in the conditions of growing crisis.
– You can deduct more 100 billion from it too. Do you like that?
– Besides taxes and related payments how much credit resources does the government intend to collect in the budget?
– About 65-70 billion dram. There is a co-financing of 15 billion. Besides that, starting from the beginning of the year there were free resources equaling to 40 billion.
– Armenia is in the first place among the CIS countries with the economic slump data. What did the government have to do to escape from such slump? What was the government’s failure?
– If they say that the government does not fight monopolies effectively, of course I will not say that it does not. All what is being done is what has not been done before. It is giving borrowings.
– What is the role of the head of the government in the process of budget collection and expenditure? Is the party affiliation of the prime-minister important? Is it important to be backed by the party?
– Certainly the head of the government has an important role in the process of budget implementation and tax collection. He controls the process. It is also important how much time the new government will need to understand the new sector well. It is one thing to express opinions from outside, it is another thing to be inside and see everything from inside. Money is never enough, and when you are coming to the ministry and have to realize this fact, you have to change something in your behavior. A very good budget can be implemented if there is a good prime-minister. It is better when the good prime-minister is backed by a good party.
– Do you distribute money to ministries and economy sectors when making the budget? Our officials are even speaking of fantastic projects this year. For example, the minister of economy Nerses Yeritsyan has a lot of such fantastic ideas. Do you provide money for all such projects?
– It is one of the bad sides of our work. The authors of such ideas see their ideas in a complex, but for us every provision and even the latest one are important. In such case usually there are conflicts between the ones giving the finances and the ideas because they care about their idea. Financiers are interested whether there will be people wishing to visit the beach of new ideas, and if they come, what they will order to eat, etc. The ones giving ideas will be asked such unpleasant questions. If they don’t answer all the questions, we can’t make a decision whether to provide financial support for such projects or no. I assure you that when making the budgets the MPs or journalists don’t ask so many questions as we do, and we are becoming very frustrating. And when I go to the parliament, I have to answer such questions myself.
– Last year the finance minister Tigran Davtyan announced in the parliament that the budget of 2009 would be targeted at poverty reduction. What will the budget of 2010 look like?
– This budget is targeted at resisting the financial crisis.
– How many budgets have you worked with so far?
– This is my 13th budget, but it’s going to be fine with the budget.