NKR meets the Global Crisis: Economy of Karabakh in need of assistance

NKR meets the Global Crisis: Economy of Karabakh in need of assistance


Twenty seven congressmen sent a letter to the US House Appropriations Committee asking to increase financial aid to Nagorno Karabakh from 8 million it received this year to 10 million for the coming 2011.

Economy is one of the key factors in the Karabakh issue settlement. The issue of economic self-sufficiency became especially important during the 1991-1994 war and communication blockade.

Presently, when Karabakh is still in a blockade with only one road – Goris-Stepanakert highway – linking it to the outer world, NKR authorities consider it top priority of their economic policy to satisfy the country's basic food and housing needs.

They haven't made much progress there though. An intergovernmental loan given by Armenia covers almost half of Karabakh's state budget deficit. During the past two months Armenia has transferred 5.7 billion drams ($14.5 million) to Karabakh.

According to NKR National Statistical Service, Karabakh's GDP for 2009 made about $260 million, showing an increase of 13.1 percent as compared to 2008. In 2009, 33 percent growth was registered in the field of construction. There is active construction of both residential and business premises – hotels, shops – in Karabakh.

Karabakh's economic policy is mainly social-oriented. Although land and state property privatization was announced in 2003 and market management of economy was introduced, nonetheless, more than 63 percent of the state budget is allocated to paying pensions and social benefits. Average monthly nominal salary is 88,768 drams ($225) having been raised by 10.3 percent as compared to 2008.

Economist Lilia Osipyan thinks that the crisis has affected NKR economy putting its rapid growth on hold: “Three-four years ago, prices for houses went rapidly up in Karabakh, people were lined-up for mortgage loans, they were making plans a few years ahead, new shops were opening. The crisis has somewhat disappointed people – they are now trying to not take up long-term projects, although the existing ones haven’t been shut down. On the whole, pensions and social benefits have always been paid on time,” says Osipyan.

The country’s economic development, increase of export volumes and foreign investments are hindered by Azerbaijan’s policy directed at preventing the presence of foreign organizations in Karabakh. That, indeed, affects the volume of investments as does the risk factor.

Nonetheless, about a dozen joint and foreign companies are operating in Karabakh, among them the only phone operator Lebanese-funded Karabakh Telecom. Total profit from communication services has increased 12.8 percent since 2008.

In the agrarian field the situation hasn't changed much: as compared to 2008 GDP indicators have grown by 1.1 percent only.

Farmers, this year, will be given seeds and fertilizers equal to a certain amount of money to be returned without interest. The project will be implemented by Fides Universal Credit Organization founded by Artsakh Investment Fund.