Pensions and Prices: Government raises pensions to “ease the social problems”

On Thursday, March 25, the Government of Armenia made a decision on raising benefits and pensions by 15 percent and 11 percent respectively, in an attempt to ease the social tension over the 37.5 percent rise in gas tariffs to come into force from April 1, and the price hike in general.

Minimal pensions will be increased by 2,500 drams (about $6) and instead of the previous 8,000 drams (about $21) they will get 10, 500 drams ($27); and social benefits will be raised by 3,000 drams (about $8).

“We are facing not only a hike in gas tariffs but also a high level of inflation in general. During the recent two years Armenia has found itself a phase of considerable price hike, and it has to be changed. By joint measures of the Central Bank of Armenia (CB) and the Armenian Government, we must be able to restrain inflation pressures,” said RA Prime Minister Tigran Sargsyan presenting the draft, adding that these decisions may ease the existing social problems.

Tigran Davtyan, RA Minister of Finance, stated that 6-6.5 billion drams (about $ 15 million) of additional allotments from the State Budget will be needed to raise the benefits and pensions.

According to economist Artsvik Minasyan, MP, member of oppositional Armenian Revolutionary Federation (ARF) Dashnaktsutyun political party, this initiative will slightly decrease the negative consequences of hikes in gas and water tariffs.

He says that the hike in tariffs has affected not only people, but also small and medium businesses. Minasyan criticizes all the claims of the government that if pensions, benefits, and salaries are raised higher that will have a chain effect of higher inflation, because the government infuses additional funds into the economy.

“There are other mechanisms of suppressing price hike, which, unfortunately, are not applied now either by the government or the Central Bank. It is a complex policy and does not depend on one factor only. I would suggest that the government do not connect inflation with raising pensions and benefits, especially to the kind of raise that cannot seriously influence it,” Minasyan concludes.