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FEATURE STORY

Helping Protect the Poor and Socially Vulnerable in Armenia

October 25, 2012

Helping Protect the Poor and Socially Vulnerable in Armenia

World Bank Group

Armine Grigoryan from the Armenia Communications Team in the Yerevan Office offers this story.

In 2009, Armenia fell into what was to be known as the nation's worst recession since early 1990s. The economy declined by 14%, and poverty rose from 28% to 36%, affecting one in every three citizens of the country. The government had to take measures to withstand the socio-economic consequences of the crisis that had revealed the vulnerabilities of the country's economy and reversed some of the hard-earned achievements.

With support from the World Bank financed Development Policy Operation (DPO), the Government of Armenia pulled together a program that would mitigate the impact of the crisis on the poor on the one hand, and foster competitiveness and economic growth on the other hand. But amidst rising poverty, unemployment and social tension, protecting the poor and the vulnerable was the more immediate priority.

During the crisis, the fiscal spending for social programs increased to about 28% in 2011 from 26% in the pre-crisis year. The poverty level would have been much higher - about 54%, had the government not sustained the targeted social spending in the scarce state budget.

The Martirosyans are a large family of eleven. The men in the family have no permanent employment. The kids attend school, and women stay at home to raise them. The two sisters and the retired mother live with them under the same roof. The family's regular monthly income consists of 44,000 drams (US$110) from the Family Benefit Program (FBP) and the mother's old-age pension of 60,000 drams (US$150). The pension is mostly used to buy medication, while the family allowance is barely enough to pay the utility bills.


" Unless we pay the bills, we will have no gas or power supply, and it will be very hard for us to keep the kids warm and to bathe them. The allowance never runs late. If it does, our family will face a catastrophe. We lived the worse years, when there was no electricity. It would be bad, dark and cold. "
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Lousine Martirosyan

housewife

Not only did the Government take measures to sustain the public spending critical for the poor, it also stepped up the reforms in the social protection system to improve its efficiency and make it better targeted. The Family Benefit Program has been revised by the social security services, which tried to identify new families in need of support, while removing ineligible ones from the system. As a result, targeting of poor households increased from 67% in 2008 to 76% in 2010.

The number of FBP recipients has grown by 250 in just one year in the Arabkir District Branch of Social Services. Adrineh Nikoyan, Head of Arabkir District Branch says: "We identified new families facing urgent problems affecting their livelihood - families that are in dire conditions."

Improving and streamlining the information systems at the social services agencies is another achievement the Government can pride itself with. In the past, people who needed state support often had to pay multiple visits and take numerous documents to the social service agencies and wait for a long time to have information checked about them. Now checking information is a matter of seconds.

Paitsar Davtyan is a FBP recipient who visited the Arabkir District Branch of Social Services to present the documents needed for her allowance. The process takes no more than 15 minutes now. "In the past, we would have to make several visits. Now, the problem is solved right on the spot; it has become easier," Paitsar ascertains.

Varduhi Harutyunyan, a Senior Specialist, has worked at the Arabkir District Branch of Social Services for 14 years. Two years ago, she would have asked Mrs. Paitsar to re-visit in order to bring additional documents. Now the electronic system has made Varduhi's job easier. She only asks the visitors to fill out the family allowance application form.

"The job has become easier both for us and the population, because we no longer have to send the residents away several times to bring additional documents; we manage to obtain the required documents ourselves electronically," Varduhi explains.

Armenia has recently addressed another problem in the social sector: Financing of pre-school education was introduced under the DPO to prepare 4 to 5 year-old children for school during one year. There was no pre-school education especially in many rural communities. Children under the age of six used to enter elementary school without any preparation.

The village of Marmashen in the north of Armenia was one of those communities. The kindergarten building had been destroyed by the 1988 earthquake. With financial support, a pre-school class was opened in Marmashen. Now 28 children attend the preschool from 9am to 3pm. They enjoy the classes, play, learn to appreciate friendship, and become more organized. In the meantime, the parents can work or have more spare time to work around the house.

"My kid goes there for two years now. It is very productive: We get to have free time around the house, and the kid comes home with homework done. Our child now knows the letters," says Armineh Baghdasaryan, resident of Marmashen.

By 2015 the preschool is planned to cover about 90% of children of the targeted age.

In 2011, the co-payments scheme was introduced in the health system with the purpose of aligning the hospital service prices with the market prices and improving the transparency of the financial flows. Price lists are now posted in visible places in all hospitals. Practically all hospitals country-wide are practicing the co-payment scheme – another reform measure that will help reduce out-of-pocket payments, which now comprise about 50 percent of health expenditures in Armenia.

Hasmik Dabaghyan, Head of Economic Section, Arabkir Medical Center says: "The fees paid by the citizens for treatment and the real prices of paid health care services became transparent." The salaries of the medical personnel at the Arabkir MC have been increased due to the revenue derived by the introduction of the co-payment system. Here, wages have grown 1.5 times on average. The hospital now pays twice as much in income tax, while mandatory social contributions have grown by 68%.

The reform process is currently focused on the state budget to make necessary allocations for the co-payments of the needy people in the future.

Overall with help from the Development Policy Operation project, Armenia has undertaken measures aimed at discounting the adverse impact of the crisis and facilitating the country's sustained development and economic growth. However, in light of the persisting challenges, new policy approaches and a faster pace of reforms are needed to address the social problems that the country is still facing, such as high levels of poverty, unemployment and underemployment.



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