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 earlier this year. 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 poverty issue has figured prominently in the ongoing power struggle between
Kocharian and opposition political parties. [For background see the Eurasia
Insight archive]. In an attempt to outflank his critics, Kocharian unveiled a
12-year plan for fighting poverty in June. Yeganian speculated that the
government may have cast doubt on the NSS findings in order to prevent a
decrease in foreign aid programs. An additional factor feeding official
concerns, Yeganian suggested, is the decrease in value of the US dollar against
the Armenian dram over the last year. As a result, the incomes of Armenians,
when denominated in dollars, appear to have increased.



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.

Haroutiun Khachatrian



Haroutiun Khachatrian is a Yerevan-based writer specializing in economic and
political affairs.