Business & Economics:
ARMENIA: REPORT SHOWS SIGNIFICANT DECLINE IN POVERTY
Haroutiun Khachatrian: 11/09/04

A recent economic survey in Armenia, showing a significant decline in the number of citizens living in poverty, has placed President Robert Kocharian’s administration in a somewhat awkward position. While Kocharian has been eager to show Armenians that living standards are improving, the report’s findings could complicate the Armenian government’s efforts to secure international aid for poverty-reduction programs.

The annual survey of household incomes by the National Statistical Service contained a full range of startling statistics. Among the most surprising: the percentage of Armenians living below the poverty line fell from 50 percent in 2002 to 42.9 percent in 2003. Similarly, the number of poorest Armenians – those who earn less than 7,742 drams (about $15) per month – also took a surprising plunge -- from 13.1 percent of the population in 2002 to 7.4 percent in 2003. At the same time, the survey indicated that the country’s income gap between rich and poor narrowed slightly.

The statistics reveals that the poverty reduction rate in Armenia far exceeds the government’s projections as outlined in its Poverty Reduction Strategic Paper (PRSP) released August 2003. In the PRSP, for example, officials estimated that that it would take until 2012 before the so-called "very poor" could be reduced to less than 8 percent of the population. The NSS figures show that this benchmark has been surpassed a full eight years ahead of the government’s schedule.

Given the NSS findings, questions are already being raised about the accuracy and potential effectiveness of the government’s anti-poverty blueprint. While officials have been happy to tout the reduction in poverty, already one government minister has disputed the NSS findings. At a recent news conference, Vardan Khachatrian, the minister of finance and economy, described the results as difficult to trust and too optimistic.

Some economic experts share Khachatrian’s doubts. "I cannot see the reasons which could bring about such a drastic change in the percentage of the population made up by the very poor," said Ruben Yeganian, a researcher at Yerevan’s Institute of Economic Problems. The decrease was particularly improbable for 2003, when Armenia’s inflation rate soared in response to an increase in foreign grain prices, Yeganian asserted. That year, bread prices increased by 31 percent between January and December, causing an overall 8.6 percent increase in the consumer price index, compared with a 2-percent rise the previous year.

A recent report by the International Crisis Group (ICG) echoes Yeganian’s assessment. The October 18 study, titled "Armenia: Instability Ahead," states that while the market reforms of the 1990s may mean Armenia is now enjoying a relative boom, relatively few Armenians have seen a vast improvement in living standards. "The benefits of economic recovery are not equally shared," the report found. "There is little sign of poverty decreasing." [For additional information see the Eurasia Insight archive].

Contradicting the NSS, the ICG report cited statistics that show 55 percent of the population lives in poverty, with wealth concentrated in Yerevan and in "circles close to the government." Meanwhile, the exodus of educated, well-trained workers -- one of the main obstacles to an Armenian economic comeback -- continues. Favored labor markets include Russia, Central Europe, Ukraine and Turkey, where potential salaries are higher than the $78 average monthly salary to be had in Armenia..

The Armenian government counts heavily on international aid to promote economic stabilization efforts, including anti-poverty programs. Armenia hopes to receive $100 million for various economic development schemes in 2004 from the US Millennium Challenge Account program, aid monies that are contingent the country’s record for democratic reform and human rights. Also in support of Kocharian’s agenda, the World Bank has pledged to deliver $250 million by November 2004 for work on rural schools, infrastructure and irrigation systems.

Some representatives of the NSS themselves have admitted to being caught off guard by the survey’s results. Hovik Hohannisian, head of Food Security Statistics, raised questions about the criteria used to determine who is "very poor," saying that the food basket used to determine purchasing power was actually more like a "bread basket."

Meanwhile, one of the country’s main creditors, the World Bank, said it saw no reason to doubt the NSS data, the Bank’s Yerevan spokesperson, Vigen Sargsian, told EurasiaNet. Aside from the World Bank, the NSS’s data is routinely cited by international organizations, including the International Monetary Fund. The NSS also receives advice from representatives of the European Union and the US Agency for International Development.

Editor’s Note: Haroutiun Khachatrian is a Yerevan-based writer specializing in economic and political affairs.