DECENTRALIZATION IN ARMENIA:FRAGMENTATION AND INERTIA

ARMENIA

• Attained independence from Soviet Union in 1991

• Achieved double-digit growth for several years• GDP started declining post 2009• GDP growth in 2012 – 3.8%• GDP - $ 10.5 billion (official exchange rate)• Population – 2.97 Million (July 2013 est.)• GDP per capita - $ 5,600 (2012 est.)

ARMENIA - GOVERNANCE

Govt. of Armenia

10+1 Administrative Regions(Governed by State Appointees)

915 Communities- 866 Rural- 49 Urban

FRAGMENTATION

• 915 Communities – Avg. community size 3,245 people

• Narrow scope of responsibilities and revenue sources

• Local government expenditure – 5-6% of consolidated public expenditure

• Lack of capacity & diseconomies of scale

RECOMMENDATIONS

• Emphasis on voluntary consolidation and inter-community collaboration

• Focus on strengthening capacity of local communities

• Sound local budget processes and improved local tax administration

• Equalization grant + Capital Development Grants + Expansion of local borrowing