Important notice

The draft State Budget is prepared by the Ministry of Finance, in consultation with other ministries and agencies. The process of drafting and enacting the State Budget is carried out in accordance with detailed budget calendars and procedures as prescribed by the Budgetary System Law.

Armenia’s fiscal year is from 1 January to 31 December. During the first half of each year, the Ministry of Finance prepares the Medium-Term Public Expenditure Framework (the “MTEF”), using budgetary information and spending requests gathered from other ministries and agencies, which it then submits to the Government for approval. The MTEF is an important component of the budgetary process as it sets out the Government’s fiscal priorities over the medium-term and analyses the historical performance and future needs of the Armenian economy on a sector-by-sector basis. The MTEF also contains certain medium-term economic and budgetary projections. The MTEF, produced annually since 2003, is typically approved by the Government in June or July of each year. The MTEF currently in effect was approved in July 2014 and covers the three-year period from 2015 to 2017.

After the Government approves the MTEF, the Ministry of Finance and other ministries and Government departments begin to prepare the draft State Budget for the following year, a basic framework of which is submitted to the Government in accordance with a schedule adopted by the Prime Minister. No later than 90 days before the end of the current year, the Government presents the draft State Budget for the following year to the National Assembly for review and comment, together with an explanatory note that contains three-year forecasts for the main socio-economic indicators of the country as well as budget projections for the three years following the fiscal year covered by the draft State Budget. The State Budget for the upcoming year is typically adopted by the National Assembly in November or early December, after which it is sent to the President for signature. The 2015 State Budget was approved by the National Assembly on 4 December 2014.

After the annual State Budget becomes law, the Government issues an implementing decree on its execution, which includes quarterly breakdowns of revenues and expenditures.

The Ministry of Finance is responsible for managing the execution of the State Budget, which sets out targets for revenues and expenditures, as well as caps on domestic and foreign borrowing and other sources of deficit financing. The expenditure levels as set forth in the State Budget are annual spending limits with breakdowns for each line item. Upon adoption of the State Budget, the Ministry of Finance promulgates annual, quarterly and monthly allocation targets for each line item. Within the annual spending limits, the Government may, and often does, reallocate funds between line items. In addition, pursuant to the Budgetary System Law, the Government has access to a reserve fund (“Government Reserve Fund”), which is a source of financing for expenditures not foreseen in the State Budget. The Government Reserve Fund may not exceed 5% of the total budgetary appropriations for the relevant fiscal year. Subject to certain conditions under the Budgetary System Law, the Government may increase spending levels beyond annual spending limits without seeking approval of the National Assembly.

There are various mechanisms in place for monitoring implementation of the State Budget. The Audit Chamber is responsible for carrying out periodic audits of Government accounts, and, in addition to the audits it is required to perform, may also on its own initiative and at any time initiate an investigation of Government programmes and expenditures. In addition, the Government has certain reporting obligations concerning the State Budget. Within 40 days after the end of each quarter, the Government is required to deliver a status report (prepared with the assistance of the Ministry of Finance) to the National Assembly on progress made in the implementation of the State Budget, and, on 1 May of each year, the Government must submit to the National Assembly a final report on the performance of the previous year’s State Budget (the “Annual Budget Report”). The Annual Budget Report is required by law to include analyses of key economic and budgetary trends and to disclose certain data on the Public Debt and any use of the Government Reserve Fund. The Audit Chamber reviews the Annual Budget Report and provides the National Assembly with its own set of findings on the accuracy of the figures included therein and on the level of Government compliance with the country’s budgetary laws and regulations. The National Assembly is required under the Budgetary System Law to discuss and approve the Annual Budget Report no later than the second Wednesday in June. As part of its commitment to e-governance and transparency, Armenia has become one of the first countries in the world to allow the real-time monitoring of the execution of the State Budget, having introduced this capacity on the Government website (www.e-gov.am) since 2012.

Note:

Actual revenues exceeded budgeted revenues in each period under review. With the exception of 2010, actual expenditures were lower than budgeted expenditures in each period under review. In 2010, actual expenditures were 2% higher than budgeted expenditures, mainly as a result of higher outlays on defence, general public services and public order and security. Actual budget deficits in each year under review were lower than budgeting estimates, except for 2009, when the deficit was substantially higher than planned as a result of the global financial crisis. In the first nine months of 2014, the actual budget reflected a surplus of AMD5.8 billion, compared to a budgeted deficit of AMD74.4 billion, mainly due to lower than expected expenditures on defence, economic relations and social welfare.

The following table sets forth the State Budget for 2015, as approved by the National Assembly:

Note:

The 2015 State Budget was based on the following macroeconomic assumptions for 2015: a nominal GDP of AMD4,867.5 billion; annual inflation of 4.0%; and an average exchange rate of AMD411.21/U.S.$1.

The 2015 State Budget envisages revenues in 2015 of AMD1,191.5 billion, or 24.5% of GDP, expenditures of AMD1,305.6 billion, or 26.8% of GDP, and an overall deficit of AMD114.1 billion, or 2.3% of GDP. The 2015 State Budget envisions net external borrowings in 2015 of AMD56.1 billion, or 1.2% of GDP excluding the proceeds from the Notes.

The following table sets forth certain budgetary projections, as set forth in the current MTEF and approved by the Government: