Country Studies are published with approval of the subject government to communicate the results of the Bank's work on the economic and related conditions of member countries to governments and to the development community. This series as been superseded by the World Bank Studies series.
This is the first full-scale World Bank
Public Expenditure Review for Armenia, which reviews the
main fiscal trends in the country for the period 1997-2001,
and develops recommendations with respect to further fiscal
adjustment, expenditure prioritization, and budget
consolidation. The analysis focuses on core issues, i.e.,
sustainability of fiscal adjustment, fiscal transparency,
expenditure priorities, and short-term expenditure
management, given the existing economy-wide institutional
constraints. The study covers extra-budgetary funds, in-kind
external grants, subsidies provided by the state-owned
companies in the energy, and utility sectors, and operations
of the Social Insurance Fund, as well as regular spending.
It suggests a medium-term action plan to address identified
weaknesses. Sectoral chapters review health, education, and
social protection and insurance. The study also analyzes
budget support for core public infrastructure, and the
country's public investment program.
This report reviews growth trends in
Armenia for the period 1994-2000, outlines major weaknesses
of existing development patterns, and suggests a package of
policy recommendations designed to accelerate enterprise
restructuring, attract investment, and encourage the
creation of new businesses in the medium term (three to five
years). Such steps are needed to sustain (and preferably to
increase) the current growth rates, to stop emigration among
the young and skilled, and to reduce poverty. The government
needs to focus much more clearly on generating the
environment for private sector led growth by removing
bottlenecks in policies, infrastructure, and institutions
that prevent new private businesses from flourishing.
International aid donors can help by supporting the removal
of administrative barriers for investments, the
rehabilitation of infrastructure, and the creation of
"restructuring agencies" that will enable firms in
key sectors to overcome or avoid common constraints to
business growth in Armenia. Successful restructuring by such
firms should have a demonstration effect on the
country's economy and help consolidate public support
for moving forward the program of reform begun a decade ago.