Is increase of pensions in third year following shift of power exciting or sad?

Pensions will finally be increased in Armenia in the third year following shift of power, but only by 10% (AMD 4,000).

Is this something to be excited about or sad about?

Pensioners are definitely not excited. It is hardly possible to think that they were expecting such a change from the “velvet” revolution, especially after the numerous promises that were lavishly given to the public during the days of the revolution in 2018.

It would be naïve to expect that the 10% increase of pensions will improve the social conditions of this layer of society. Pensions haven’t been raised in Armenia for the past four to five years. Instead, over the past years, the prices of many products have gone up. Moreover, sometimes not by percent, but by times.

In such conditions, a 10% increase of pensions is nothing. It might somewhat mitigate the negative impact of the new inflation that is expected next year, but it won’t solve an essential social issue, especially since the government is leading a policy on moving the tax burden to consumption. Based on the latest amendments to the Tax Code, there will be more inflation next year due to the increase of pressure of excise tax on certain products.

Of course, inflation won’t be limited by that. The time limit of the special customs regime granted to Armenia in the territory of the Eurasian Economic Union during the import of products from third countries is ending. This time, it will concern 700-800 brand name products, and among them there are many types of foods, drugs and several other products.

The tariff for natural gas consumption is expected to increase next year. Perhaps there is no need to say what kind of a direct impact this will have on the prices of several products and services. The rise of the natural gas price has always had an essential impact on the Armenian economy. What’s more, it might lead to increase of electricity prices.

The chain of inflation in the public services sector will rarely stop here. In just a matter of days, the water supplying company will submit a new bid for tariff adjustment. Even if we overlook all the other factors that have an influence on this, the tariff for drinking water will go up. This is what is envisaged in the contract signed with the managing company. Of course, the contract was signed by the former authorities, but this doesn’t change anything for consumers. Over the past two years, it was possible to avoid inflation by compensating the burden of tariff adjustment at the expense of the budget and lifting certain obligations off of the managing company. What will happen this time? We’ll see soon enough.

Next year, the government will be reviewing the cadastral price of real estate and increase it by 3 times, and this means that many citizens exempt from paying property tax will have to pay the tax. This proposal implies almost complete taxation of real estate.

But that’s not all. However, even this is enough to understand that the 10% increase of pensions or salaries in certain sectors that the government is talking about, means nothing.

To improve the social conditions in the country, the growth of people’s incomes needs to exceed the real inflation. This doesn’t concern the inflation that is recorded in the official statistics, but the inflation of first necessity items and services which is a couple of times higher. In such conditions, it seems as though there will be no increase in budgetary salaries in Armenia next year as well. There will be more social issues after some workers are laid off and the salaries of others are increased at the expense of the salaries that the laid off workers would receive. This simply means transferring funds from one place to another.

There was a time when the representatives of the current political authorities would blame the former authorities for giving low salaries and pensions, but now they are facing the same problem. Not too long ago, Nikol Pashinyan even tried to justify the reason why pensions aren’t going up. According to him, an additional AMD 30,000,000,0000 is required in order to raise pensions by only AMD 5,000.

It’s clear that the country doesn’t have so many resources and opportunities to increase people’s incomes at once, but it’s the government’s job to find other solutions.

One of the best ways of raising people’s incomes is the creation of jobs. One breadwinner for a four-member family is one thing, and two or three breadwinners in a four-member is another thing.

Armenia is not even making much progress in terms of the creation of jobs. Of course, there has been an increase in the number of registered workers following shift of power, but this is not what gives a picture of the labor market.

There is still a high level of unemployment in Armenia. There are at least 200,000 people who are unemployed, and this is a serious social issue, the solution to which requires mobilization of the economy.

Despite the growth that is officially recorded, it is hard to say that Armenia has a good economy. There is no inclusive growth that the government was talking about after shift of power, and there can’t be inclusive growth, if we take into consideration how the progress is being recorded. Services, especially gambling can’t help develop the economy, raise incomes and increase the budget to the extent that it is possible to ensure tangible growth of salaries and pensions.

One should not have such expectations so long as the economy is in this situation. It’s not by chance that the cabinet and the head of the cabinet are talking about raising pensions by only 10% in the third year after shift of power, but there was a time when they were promising mountains and valleys.

HAKOB KOCHARYAN