1. State Budget Social Expenditures in 2002: Summary Prepared by Varsenik Mnatsakanyan Yerevan - 2003 Economic Development and Research Center Armenian Budget Analysis Project

2. Overview  RA Law on 2002 State Budget was adopted on December 28, 2001.  The beginning of the year program assumed budget expenditures of 258.9 bln AMD, revenues of 219.2 bln AMD and deficit of 39.7 bln AMD.  Budget was projected based on annual economic growth of 6% and inflation of 3.0%.  In the course of the year, the beginning of the year program was adjusted.  According to the adjusted program, revenues and expenditures would total 222.3 bln AMD and 262.0 bln AMD, respectively.

3. Key Social-Economic Indicators 20012002 Population (1000 people) 3,213.03,210.8 Gross Domestic Product (GDP), (bln AMD) 1,175.51,357.3 GDP per capita (USD) 659.1737.2 Economic growth (%) 9.612.9 Inflation (annual average, %) 3.11.1 Exchange rate (AMD/USD, annual average) 555.1573.4 Budget revenues (bln AMD) 193.6228.3 Growth against the previous year (%) -17.9 Revenues/GDP (%) 16.516.8 Budget expenditures (bln AMD) 236.0262.3 Growth against the previous year (%) -11.1 Expenditures/GDP (%) 20.817.4 Budget deficit (bln AMD) -42.5-34.0 Growth against the previous year (%) --19.9 Deficit/GDP (%) 3.60.6 Import of goods (mln USD) 877.4991.1 Growth against the previous year (%) -0.812.9 Export of goods (mln USD) 341.8507.2 Growth against the previous year (%) 13.748.4

4. State Budget Expenditures  Actual State Budget expenditures in 2002 totaled 262.3 bln AMD.  The annual expenditure program was executed by 100 %.  As compared to the previous year, expenditures grew by 11.1 % or 26.3 bln AMD in 2002.

5.  In 2002, the composition of actual expenditures was definitely changed. * Social expenditures relate to education and science, healthcare, social security and social insurance, culture, information, sports and religion and residential utilities. ** Expenditures on economic services relate to the fuel and energy complex, agriculture, forestry and water system, fish breeding, industry, mineral resources, construction and environment, transport, road management and communication and other economic services. *** Other expenditures relate to general public services, defence, maintenance of public order and security and expenditures not classified in the main category.

6. Social Expenditures  Actual social expenditures in 2002 totaled 82.1 bln AMD against 88.3 bln AMD envisaged by annual program.  As compared to 2001, these expenditures grew by 3.7 % or 2.9 bln AMD.

7. Education and Science  In 2002, expenditures on science and education totaled 28.7 bln AMD.  Annual program of expenditures in this area was executed by 98.2 %.  Expenditures increased by 6.2 % or 1.7 bln AMD against 2001.  Per capita expenditures on education and science totaled 8,953 AMD (15.6 USD) in 2002 against 8,425 AMD (15.2 USD) in 2001.  Per capita expenditures on students of public educational institutions totaled 36,213 AMD (63.2 USD) against 33,967 AMD (61.2 USD) in 2002.

8. (a) - General education (primary, lower secondary, upper secondary) (b) - Public management in the area of education and science (c) - General special education (d) - Preliminary professional (vocational) education (e) - Average professional education (f) - Supplementary education (g) - Higher and post-graduate professional education (h) - Off-school education

9. Health Care  Expenditures on health care in 2002 totaled 16.0 bln AMD against the programed16.2 bln AMD.  Expenditures on health care in 2002 grew by 1.3 % or 210.2 mln AMD against 2001.  Per capita annual expenditures on health care of population totaled only 4,969 AMD.  Of executed expenditures, 5.2 bln AMD was directed at redemption of arrears from the previous years.

11. Social Insurance and Social Security  Expenditures on social insurance and social security in 2002 totaled 23.8 bln AMD.  The annual budget program of this expenditure was under- performed by 2.8 %.  Expenditures of this area in 2001 fell by 8.9 % or 2.3 bln AMD.  The main reason behind the decline in these expenditures was decrease of expenditures on poverty family benefits.

12. Figure 6. Structure of expenditures on social insurance and social security in 2001-2002 (a) - Public management in the area of social insurance and social security (b) - Pension provision (c) - Public benefits to population (d) - Measures of social security (e) - Other social programs

13.  In 2002, 146,529 families received poverty family benefits; this compares to 234,187 families registered previously.  Since January 1 2002, base rate of the benefits allocated to families totaled 4000 AMD, as compared to the previous rate of 3500 AMD.  The benefit of 1300 AMD allocated to each family member is increased to 1500 AMD, and is given only to the under-aged family members.  Base pension in 2002 totaled 3000 AMD as compared to the former 2860 AMD.

14. Culture, Information, Sports and Religion  Expenditures directed at culture, information, sports and religion in 2002 totaled 6.3 bln AMD.  Annual program of expenditures of this sector was executed by 98.6 %.  As compared to 2001, expenditures of this sector in 2002 increased by 18.2 % or 970.8 mln AMD.

15. Figure 7. Composition of State Budget Expenditures on Culture, Sports and Religion in 2001-2002

16. Housing and Utilities  Expenditures on housing and utilities in 2002 totaled 7.3 bln AMD.  Annual program execution of expenditures in this area comprised only 61.4 %.  Low level of program execution was due primarily to under-performance of foreign finance programs.  As compared to the previous year, expenditures increased by 47.5 %.

17. Figure 8. Structure of Expenditures on Housing and Utilities in 2001-2002

18. About EDRC About EDRC Economic Development and Reasearch Center (EDRC) is a non-profit, politically unaffiliated, independent and specialized non governtmantal organization, which is established in 2001 in Yerevan, Armenia. The mission of EDRC is to promote social and economic development, ensure participation of non governmental organizations in the process of economic policy making and to raise public awareness of economic, social and demographic issues. EDRC focuses on supporting economic freedom and democracy as decisive conditions for the successful development of Armenian Economy. Believing that the future growth of Armenia requires transparent processes in government and society, EDRC promotes these ideas as well as fosters mutual understanding between Armenia and other countries. 48 Mamikonyants street, 48 Mamikonyants street, 1 st building, 6 th floor, 1 st building, 6 th floor, Yerevan 375051 Yerevan 375051 Tel.:(374 1) 234 420 Tel.:(374 1) 234 420 Fax:(374 1) 236 589 Fax:(374 1) 236 589 E-mail: info@edrc.am E-mail: info@edrc.amwww.edrc.am “Armenian Budget Analysis” Project “Armenian Budget Analysis” Project Upon a joint initiative, EDRC and OXFAM GB are implementing “Armenian Budget Analysis” Project (ABA Project). ABA Project is aimed at overicoming problems of socially vulnerable layers and poverty reduction in Armenia through improvement of the governance system and policies and institutional developments of society. ABA Project will make an attempt to identify whether Armenian National Government and Local Self-Government bodies draft and implement budgets that derive from the interests of the poor, the biggest share of the society, and whether those budgets contribute to poverty reduction. The objective of ABA Project is establishment of a basis for enhancement of public participation in the processes of budget and policy drafting, as a result of which policy making The objective of ABA Project is establishment of a basis for enhancement of public participation in the processes of budget and policy drafting, as a result of which policy making and policy implementation will improve.