2011–2013 MEDIUM–TERM PUBLIC EXPENDITURE FRAMEWORK TABLE OF CONTENTS INTRODUCTION........................................................................................................ 4 Objectives and Tasks.................................................................................................................................. 4 Medium-Term Public Expenditures Planning Attitudes......................................................................... 5 Organizational Bases for Elaboration of the MTEF 2011-2013 ...............................................................6 Reforms Aimed at Improvement of Medium-Term Expenditure Planning ........................................... 7 PART A. FISCAL POLICY.......................................................................................... 8 CHAPTER 1. STRATEGIC AND MEDIUM-TERM PRIORITIES AND THEIR PROVISION................................................................................................................. 9 STRATEGIC AND MEDIUM-TERM PRIORITIES .......................................................................9 OBJECTIVES OF MEDIUM-TERM EXPENDITURE FRAMEWORK .........................................9 FISCAL PRINCIPLES AND INDICATORS ....................................................................................9 LONG-TERM FISCAL PRINCIPLES..............................................................................................9 SHORT-TERM AND MEDIUM-TERM FISCAL INDICATORS ................................................10 CHAPTER 2. MACROECONOMIC ANALYSIS AND FORECAST OF THE MAIN ECONOMIC AND FISCAL INDICATORS IN THE REPUBLIC OF ARMENIA.. 11 2.1. INTRODUCTION ........................................................................................................................11 2.2. DESCRIPTION OF ECONOMY .....................................................................................................11 Aggregate supply...................................................................................................................................... 12 Aggregate demand ................................................................................................................................... 17 Price variables.......................................................................................................................................... 18 Financial market ...................................................................................................................................... 20 Balance of payment.................................................................................................................................. 21 Public sector............................................................................................................................................. 24 2.3. ESTIMATES DERIVING FROM FORECASTS AND EXISTING RISKS ..................................................25 Estimates which lay down in the bases of economic forecasts..............................................................25 Risks available in forecasts ...................................................................................................................... 26 CHAPTER 3. THE RA 2011-2013 STATE BUDGETS REVENUES POLICY AND FORECASTS .............................................................................................................. 30 3.1. MAIN CHARACTERISTICS OF THE REVENUES POLICY IN 2011-2013........................30 3.2. 2011-2013 STATE BUDGETS REVENUE FORECASTS.......................................................32 CHAPTER 4. BUDGET FRAMEWORK .................................................................. 36 4.1. STATE BUDGET DEFICIT .....................................................................................................36 Risks available in forecasts in regard with the volume of state budget deficit. .................................... 38 4.2. CHANGES FORECASTED IN THE PACKAGE OF RESOURCES AND EXPENDITURES OF STATE BUDGETS FOR 2011-2013 .........................................................................................38 4.3. FORECAST OF 2011-2013 STATE BUDGET EXPENDITURES BY SECTORS ...................39 4.4. FORECAST OF STATE BUDGET EXPENDITURES FOR 2011-2013 BY MAIN ARTICLES OF ECONOMIC CLASSIFICATION.............................................................................................42 4.5. FISCAL RISKS OF THE 2011-2013 MTEF .............................................................................43 Sources of Risks........................................................................................................................................ 43 1 2011–2013 MEDIUM–TERM PUBLIC EXPENDITURE FRAMEWORK Possible Consequences of the Risks and Adjustment Tendencies......................................................... 44 Compensation Opportunities .................................................................................................................. 45 PART B. STRATEGY OF EXPENDITURE POLICY............................................... 46 CHAPTER 5. EXPENDITURE PRIORITIES OF 2011-2013 STATE BUDGETS... 47 CHAPTER 6. PUBLIC ADMINISTRATION SYSTEM ........................................... 48 6.1 SITUATIONAL OVERVIEW ..................................................................................................48 6.2. PRIORITIES, OBJECTIVES, AND EXPENDITURE DRIVERS OVER MTEF PERIOD......49 6.2.1. Priorities.........................................................................................................................................49 6.2.2. Objectives....................................................................................................................................... 50 6.2.3 Expenditure drivers ........................................................................................................................ 50 6.3. EXISTING EXPENDITURE COMMITMENTS .....................................................................51 CHAPTER 7. EDUCATION AND SCIENCE........................................................... 54 7.1. EDUCATION ..........................................................................................................................54 7.1.1. SITUATIONAL OVERVIEW AND MAIN TASKS......................................................................54 7.1.2. OBJECTIVES AND PRIORITIES OVER MTEF PERIOD ........................................................... 66 7.1.3. EXPENDITURE COMMITMENTS OVER THE MTEF PERIOD ............................................... 73 7.2. SCIENCE..................................................................................................................................79 7.2.1. SITUATIONAL OVERVIEW AND MAIN PROBLEMS ............................................................. 79 7.2.2. OBJECTIVES AND PRIORITIES OVER MTEF PERIOD ........................................................... 83 7.2.3. EXPENDITURE COMMITMENTS OVER THE MTEF PERIOD ............................................... 85 7.2.4. SUMMARY OF FINANCIAL NEEDS OF THE SECTOR FOR 2010-2012 ................................. 86 CHAPTER 8. HEALTH CARE.................................................................................. 87 8.1. SITUATIONAL OVERVIEW AND MAIN PROBLEMS.......................................................87 8.2. OBJECTIVES AND PRIORITIES OVER MTEF PERIOD .....................................................94 8.3. EXPENDITURE COMMITMENTS OVER THE MTEF PERIOD .........................................97 CHAPTER 9. SOCIAL PROTECTION................................................................... 103 9.1. SITUATIONAL OVERVIEW AND MAIN PROBLEMS.....................................................103 9.2. OBJECTIVES AND PRIORITIES OVER THE MTEF PERIOD...........................................118 9.3. EXPENDITURE PROGRAMS OF THE SECTOR OVER THE MTEF PERIOD.................122 CHAPTER 10. RECREATION, CULTURE AND RELIGION .............................. 136 10.1 CULTURE.............................................................................................................................136 10.2. RADIO AND TELEVISION BROADCASTING, PUBLISHING SERVICES.....................160 10.3. RECREATION AND SPORTS SPHERE.............................................................................172 10.4. YOUTH SECTOR................................................................................................................177 CHAPTER 11. AGRICULTURE ............................................................................. 181 11.1. SITUATIONAL OVERVIEW .............................................................................................181 11.2. OBJECTIVES, PRIORITIES, AND EXPENDITURE DRIVERS OVER MTEF PERIOD..182 11.3. EXISTING EXPENDITURE COMMITMENTS IN THE SECTOR ....................................183 CHAPTER 12. ENVIRONMENTAL PROTECTION ............................................ 190 12.1. SITUATIONAL OVERVIEW .............................................................................................190 12.3. EXISTING EXPENDITURE COMMITMENTS .................................................................195 2 2011–2013 MEDIUM–TERM PUBLIC EXPENDITURE FRAMEWORK CHAPTER 13. TRANSPORT AND COMMUNICATIONS.................................. 199 13.1. SITUATIONAL OVERVIEW .............................................................................................199 13.2 OBJECTIVES, PRIORITIES, AND EXPENDITURE DRIVERS OVER MTEF PERIOD...202 13.3. EXPENDITURE