Incentive Payment Institute Smoothly Replaced by Salary Increases, Says MP

The budget for the upcoming year is truly ambitious: according to the government program, we aim to ensure at least a 7% economic growth each year. Considering that our economic growth will be around 12-14%, achieving an additional 7% growth on this base is a great leap. We've established that benchmark and I am confident we can realize it. Importantly, this growth must not be mechanical, but rather inclusive and as participatory as possible, not reliant on one or two sectors alone, but involving as many people, sectors, and companies as possible,” stated Babken Tunyan, Deputy Chairman of the Standing Committee on Economic Affairs, during a discussion about the upcoming year’s financial document at the National Assembly session on November 16, as reported on the official NA website.

According to the MP, significant work has been conducted while drafting the budget document. “Working on the budget is an unthankful task, and I would like to thank the Ministry of Finance for taking on this primary burden. Drafting the budget is understood to be a culture of distributing disappointments evenly, as everyone is always dissatisfied in some way. It’s important that all disappointments are shared fairly,” he mentioned, adding that it is crucial to adopt the option that provides the maximum benefit to the country.

Tunyan also commended the work of the Standing Committee on Financial-Credit and Budgetary Affairs, led by Gevorg Papoyan, for discussing the document in detail during joint committee meetings. The MP addressed the increase in public debt resulting from the pandemic and the 44-day war, as well as its implications. It was noted that by the end of this year, the debt-to-GDP ratio will be approximately 50-51%, driven by the exchange rate increase and GDP growth. Due to these two factors, this ratio has already decreased by 10 percentage points from an acceptable level, which will allow the Government to implement more initiatives next year.

Tunyan reminded that next year, pension, minimum, and base salaries are also set to increase. “We will raise the base salary, which will cause public servants' salaries to increase. We will reduce the fund for bonuses— not in the same amount— but overall, it will result in an average increase of 10% in public sector salaries. We are smoothly replacing the bonus institute with a model of salary increases,” the committee deputy chairman stated. According to him, the bonus fund will continue to operate to some extent, but it will align with the logic of incentives, meaning it will be a tool based on work performance results.

The MP touched upon the increase in capital expenditures, which are expected to grow by about 50%, reaching approximately 550 billion drams. Speaking about the economic growth rates brought about by the influx of foreign visitors to the country, Babken Tunyan expressed that one of the most significant issues is the short-term economic impact, which needs to be transformed into long-term growth potential.

He also addressed the universal income declaration system, which will be implemented next year; corresponding legislative regulations will be adopted by the end of this year. The declaration system will place a primary emphasis on income, while the expenditure part will pertain to categories where social credits will be applicable.

When discussing expenditure performance, Tunyan opined that the challenge is not only collecting taxes but also ensuring they are spent timely, efficiently, and fully. He believes that failing to execute expenditures on time will harm the economy and economic activity more than not collecting some tax revenues. The committee vice-chairman emphasized the importance of adjusting performance indicators and metrics. “We should not discuss how much money we have given to a particular minister and how much has been spent. We should evaluate whether the respective agencies have met their set program objectives according to program budgeting. To ensure this is not highly subjective, the evaluation criteria must be measurable and clear from the outset so we can understand what is happening later.”

Babken Tunyan expressed that unfortunately, much work remains in this regard, and budget discussions indicate that some of the government’s partners have not fully internalized the rules of program budgeting and need to work on it. The MP talked about the relationship between tax authorities and citizens, stating that the agency should be perceived as a service provider, not as a state police force or an enemy of the taxpayer or businessman. It should be viewed as an entity that helps businesses or taxpayers participate in governance through the taxes they pay. In his assessment, this perception has changed over the last years, and much remains to be done in this direction.

During the Q&A session, discussions also touched upon measures to improve demographics, steps to promote birth rates, and the efficiency of budgetary expenditures.