Armenia public expenditure review the report by the world bank 2002
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Armenia  Public Expenditure Review the Report by the World Bank 2002. Armenia: country background. 3 mln people, $2.5 bn economy More 6 mn in the Diaspora IDA post-conflict country Leading reformer in the CIS Average growth in 2000-03 – about 8%. Core recommendations:.

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Armenia public expenditure review the report by the world bank 2002 l.jpg

Armenia Public Expenditure Reviewthe Report by the World Bank2002

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Armenia: country background

  • 3 mln people, $2.5 bn economy

  • More 6 mn in the Diaspora

  • IDA post-conflict country

  • Leading reformer in the CIS

  • Average growth in 2000-03 – about 8%

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Core recommendations:

  • Improve a revenue performance by at least 2% of GDP;

  • Provide for major improvements in budget accountability;

  • Ensure an additional reduction in budget deficit relative to the 2001 level and full elimination of quasi-fiscal deficit;

  • Channel incremental revenues to increase expenditures on basic health and education as well as on old-age pensions;

  • Accelerate sectoral and civil service reforms to ensure much more efficient use of budget resources, primarily in social sectors and public administration.

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Innovative Technical Features

  • Attention to the off-budget and quasi-fiscal issues

  • Coverage of revenue performance

  • Incidence analysis of public spending in health and education

  • Combination of institutional analysis with the analysis of policy outcomes at both macro and sectoral levels

  • Emphasis on cross-country comparisons

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Scheme of QF Subsidization

The rest of the world



Energy system





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Expenditure Ratios in Selected Economies

  • Under-financing of Health and Social Protection/Insurance vs. Education

  • Very low level of spending on Government Administration

  • Defense and Real sector – really too high

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Sources of budget uncertainty:

  • Non-realistic budgeting

  • Budget is over-committed

  • Budget discipline is weak

  • High dependence on external financing

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Budget transparency

-- Quality of classification, coverage, budget accounting

  • Switching to the new GFS (2001) budget classification and transition to the new accounting standards

  • Consistency in presentation between annual budget Laws and budget execution reports

  • Improvements in reporting on budget arrears, guaranties, on multi-sectoral donor projects, non-cash external grants

  • Reporting on salaries in the budgetary sector and public employment

  • Transparency of operations of the Reserve Fund

  • Making budgetary support for public utilities more transparent

  • Reduce share of spending classified as “other expenditures”

  • Establishment of a modern system of financial reporting by state enterprises, including in education and health

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Features of Policy Dialogue

  • Joint PER with the Government

  • Working Group chaired by the 1st Dep Minister of Finance

  • Local Consultants as a bridge to the senior MOF staff

  • Direct link to the TA programs of the IMF and DFID

  • Expanded consultations at the final stage of the report preparation – 8 months of editing

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Links to the Lending/TA (1)

1. SAC5: several core conditions:

  • Plan to Improve Budget Management – 15 specific benchmarks

  • Action Plan on Tax and Customs Administration – 12 specific benchmarks

  • School Rationalization Program

  • Hospital Optimization Plan in Yerevan

  • Advancing Pension Reforms (collections and increase in the benefits)

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Links to the Lending/TA (2)

2. Education Credit: funding to consolidate reforms – per capita funding, downsizing, attrition (15,000 redundant teachers)

3. IDF Grant: Expanding Treasury Capacity

4. New Stage of the DFID Program: capacity building for the MTEF

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Specific Outcomes

  • Making a MTEF an annual exercise

  • Increase in health Spending:by more than 1/3 in 2002 vs. 2001

  • Improvements in budget transparency: share of non-classified budget expenditures – from 1/3 to 12% in 2003

  • Increased number of active taxpayers to the Pension Fund by more than 10%

  • Improved administration of excise taxes