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ARM 2003 Poverty Reduction Strategy Paper.Pdf R E P U B L I C O F A R M E N I A P O V E R T Y R E D U C T I O N S T R A T E G Y P A P E R YEREVAN, 2003 POVERTY REDUCTION STRATEGY PAPER CONTENTS ACKNOWLEDGMENTS..........................................................................................................................................................3 LIST OF ABBREVIATIONS.......................................................................................................................................................4 LIST OF TABLES........................................................................................................................................................................5 LIST OF FIGURES ......................................................................................................................................................................6 INTRODUCTION ......................................................................................................................................................................7 THE PRSP DEVELOPMENT PROCESS ...............................................................................................................................8 SECTION 1. POVERTY SITUATION ANALYSIS..............................................................................................................14 CHAPTER 1. DEFINITIONS OF POVERTY AND EVALUATION METHODOLOGY...................................................14 CHAPTER 2. POVERTY AND INEQUALITY IN ARMENIA: FACTORS, CURRENT SITUATION AND TRENDS ...16 2.1.EVOLUTION OF POVERTY AND CONDITIONING FACTORS OF POVERTY .................................................16 2.1.1. POVERTY AND INEQUALITY IN SOVIET ARMENIA................................................................................16 2.1.2. REPUBLIC OF ARMENIA: SYSTEMIC CRISIS AND POVERTY................................................................16 2.1.3. ARMENIA: 1994-2002 ECONOMIC GROWTH, POVERTY AND INEQUALITY .......................................17 2.2.DESCRIPTION OF POVERTY AND SPECIFIC FEATURES..................................................................................25 2.3.HUMAN POVERTY IN ARMENIA ..........................................................................................................................29 SECTION 2. PRSP GOALS AND MAIN POLICY DIRECTIONS ....................................................................................33 CHAPTER 3. PRSP GOALS ................................................................................................................................................33 3.1.POVERTY AND INEQUALITY REDUCTION ........................................................................................................33 3.2.HUMAN POVERTY REDUCTION...........................................................................................................................34 CHAPTER 4. POVERTY AND INEQUALITY REDUCTION POLICY PRIORITIES ......................................................35 CHAPTER 5. THE PRSP AND THE MILLENNIUM DEVELOPMENT GOALS..............................................................37 SECTION 3. POVERTY REDUCTION STRATEGY..........................................................................................................39 CHAPTER 6. SECURING ECONOMIC GROWTH AND THE ACCOMPANYING REDUCTION OF POVERTY ........39 6.1.PRSP MACROECONOMIC FRAMEWORK ............................................................................................................39 6.2.PRINCIPAL ISSUES IN THE REDUCTION OF RURAL POVERTY.....................................................................42 6.3.INSTITUTIONAL REFORMS AND THE IMPROVEMENT OF THE BUSINESS ENVIRONMENT ................. 45 6.3.1. PUBLIC ADMINISTRATION AND JUDICIAL SYSTEM REFORMS...........................................................45 6.3.2. ANTI-CORRUPTION POLICY.........................................................................................................................51 6.3.3. IMPROVEMENT OF THE BUSINESS AND INVESTMENT ENVIRONMENT...........................................52 6.3.4. TAX POLICY.....................................................................................................................................................60 CHAPTER 7. HUMAN DEVELOPMENT...........................................................................................................................62 7.1.SOCIAL PROTECTION SYSTEM.............................................................................................................................62 7.1.1. DESCRIPTION OF THE SOCIAL PROTECTION SYSTEM AND THE MAIN THRUSTS OF POLICIES .62 7.1.2. SOCIAL ASSISTANCE SYSTEM ....................................................................................................................64 7.1.3. PENSION SYSTEM...........................................................................................................................................70 7.1.4. EMPLOYMENT PROGRAMS ..........................................................................................................................75 7.2.INVESTMENT IN HUMAN CAPITAL.....................................................................................................................76 7.2.1. HEALTH ............................................................................................................................................................76 7.2.2. EDUCATION .....................................................................................................................................................80 7.2.3. OVERCOMING POVERTY: CULTURAL CONCEPT....................................................................................88 7.2.4. ENVIRONMENTAL PROTECTION ................................................................................................................89 1 POVERTY REDUCTION STRATEGY PAPER 7.3.INFRASTRUCTURE DEVELOPMENT....................................................................................................................90 7.3.1. WATER UTILITIES...........................................................................................................................................90 7.3.2. ROAD CONSTRUCTION..................................................................................................................................93 7.3.3. ENERGY SECTOR ............................................................................................................................................95 CHAPTER 8. THE MAIN EMPLOYMENT ISSUES IN THE CONTEXT OF POVERTY REDUCTION .........................97 8.1.EMPLOYMENT: TRENDS AND SITUATION ........................................................................................................97 8.2.EMPLOYMENT PERSPECTIVES...........................................................................................................................101 SECTION 4. PRSP IMPLEMENTATION FINANCING: BUDGET FRAMEWORK ...................................................104 CHAPTER 9. TRENDS IN THE CONSOLIDATED BUDGET AND POVERTY REDUCTION ....................................104 9.1.PUBLIC EXPENDITURES AND POVERTY REDUCTION STRATEGIES .........................................................105 9.2.THE CONSOLIDATED BUDGET DEFICIT AND THE SOURCES OF ITS FINANCING..................................108 CHAPTER 10. PUBLIC DEBT OF THE REPUBLIC OF ARMENIA .................................................................................110 CHAPTER 11. THE PRSP AND PLANS FOR THE MEDIUM TERM STATE EXPENDITURES....................................113 SECTION 5. PRSP IMPLEMENTATION MANAGMENT, MONITORING AND REGULATION ...........................114 CHAPTER 12. PRSP IMPLEMENTATION MANAGEMENT STRUCTURE...................................................................114 CHAPTER 13. PRSP MONITORING, EVALUATION SYSTEM AND REVIEW.............................................................115 ANNEXES...............................................................................................................................................................................119 2 POVERTY REDUCTION STRATEGY PAPER ACKNOWLEDGMENTS The Government of the Republic of Armenia expresses its gratitude to all those who have taken part in putting together the Poverty Reduction Strategy Paper. Particular thanks are due to: (i) Members of the PRSP Coordination Board headed by the Minister of Finance and Economy, Vardan Khachatryan; (ii) Members of the PRSP Coordination Working Group headed by the Deputy Minister of Finance and Economy, Tigran Khachatryan (Head of the Group) and the First Deputy Minister of Social Security, Ashot Yessayan (Deputy Head of the Group); (iii) All the structural units of public authorities and their specialists who have taken part in developing the PRSP; (iv) The World Bank, IMF, UNDP, DFID, the Government of the Netherlands, and the Government of Germany for the technical and financial support at various stages of the development of the PRSP. The Government is also indebted to other international organizations that provided support for this process (The European Union, European Council and USAID). The governments of many countries involved in the process, through their contribution of the professional knowledge and skills of their staff and international experts also helped to improve the draft PRSP; (v) NGOs, private sector representatives, local governments, political parties and individual specialists, and
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