FAO GLOBAL INFORMATION AND EARLY WARNING SYSTEM ON FOOD AND AGRICULTURE
WORLD FOOD PROGRAMME

SPECIAL REPORT

CROP AND FOOD SUPPLY SITUATION IN ARMENIA

8 August 2000

1. OVERVIEW

The report presents the results of a recent FAO/WFP Crop and Food Supply Assessment Mission to the country to obtain up to date information on the prospects for food production in 2000, to identify the constraints to increasing food production and assess the food supply situation. Throughout its work, the Mission received cooperation from the Government, the EC, and particularly the Food Security Programme, the World Bank, the GTZ, all UN agencies present as well as national farmers' organizations. The Mission made field visits to the Ararat Valley (Masis, Echmiadzin), as well as Talin and Aparan in Aragatsotn marz, which enabled it to observe fields and interview farmers in very different agro-climatic zones ranging from the fertile, irrigated Ararat valley near the capital Yerevan to the colder mountainous zones.

Crop production in Armenia is stagnating. Grain output in 1999 is officially estimated at 301 000 tonnes, not significantly more than output in 1991, despite an 11 percent increase in the area sown since that year. Although still higher than in 1991, the area sown to cereals has contracted since 1997 in response to low per hectare returns for many farmers and import competition. Moreover, if cereals displaced fruit, fodder and vine crops substituted in the 1990s, now there is evidence of the re-diversion of wheat area to vineyards and tobacco. Net emigration and the undeveloped land market has led to a significant increase in the areas under fodder crops.

Average yields for grain and most other crops (with the exception of potatoes and vegetables) are markedly lower, even in good years, than in 1991. This is the result of physical, financial, institutional and above all marketing constraints, which combine to keep crop earnings and working capital on farm low. Most of the agricultural land has been privatized into small, scattered holdings but there is little physical or institutional back up for small farmers, who, like the rest of the population have been impoverished by hyperinflation in the early nineties and very limited earning opportunities.

Transport and access to markets are possibly the chief obstacles to a recovery in agricultural production. The domestic market is small and contracting and access to external markets remains very difficult. Road, rail and market infrastructure is inadequate, reducing the competitiveness of exports. Without export markets, the country lacks adequate markets for much of its agricultural production, as well as the economies of scale for investments in agri-processing, manufacturing and the creation of employment.

Cereal production in 2000 benefited from good growing conditions until June but was affected by persistent hot and dry conditions afterwards. This could result in a harvest somewhat below the target of 320 000 tonnes, particularly if the area sown to spring cereals declined further. Nevertheless, forecast production - 295 000 tonnes of cereals (excluding pulses) at this stage - plus imports of 418 000 tonnes are expected to cover domestic cereal requirements, estimated at 713 000 tonnes, including 400 000 tonnes for human consumption. Since liberalization of the grain market the bulk of imports have been mobilized commercially. Cereal food aid requirements are tentatively estimated at 25 000 tonnes for targeted distribution to vulnerable populations and total food aid requirements, including also vegetable oil and sugar, are estimated at 40 000 tonnes. The extent of vulnerability is increasing, mainly as a result of the very severe government budget constraint this year which has led to cut backs in social security payments for vulnerable households as well as long delays in paying pensions and salaries.

A large section of the population is facing a precarious food security situation mainly due to lack of purchasing power. After a decade of high levels of unemployment, low wages for the majority, and the steady erosion of safeguards against poverty, living conditions are precarious. A significant proportion of the population (in both urban and rural areas) earns inadequate income to purchase a basic food basket, while many more are at risk of temporary disruptions in income. The slowdown in growth in 2000 coupled with arrears in the payment of salaries and benefits has resulted in a marked increase in interest in WFP food for work programmes this year.

In 2000 WFP is targeting 170 000 people under a Protracted Relief and Recovery Operation (PRRO 6120.01) WFP's programme is two-tiered, consisting of a take-home supplementary relief ration allocated to the socially vulnerable and a food ration distributed to participants of Food for Work (FFW) projects which covers the needs of an average household of 4 persons. The overall food requirements for WFP's 2000 operation are estimated at 16 740 metric tonnes of wheat flour, 2 308 metric tonnes of vegetable oil, and 420 metric tonnes of sugar. Uncovered needs against this requirement amount to 1 851 tonnes of wheat flour, 950 tonnes vegetable oil and 103 tonnes of sugar.

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2. DEVELOPMENTS IN FOOD PRODUCTION AND SUPPLY

2.1 The Macro-Economic and Policy Framework

Macro-economic reforms, tight fiscal and monetary policies and a broad range of structural reforms have resulted in sustained real growth in GDP since1994. GDP recovery slowed in 1999 and has stagnated this year. GDP in 1999 was still only about 40 percent of the 1989 level. Agriculture is the only sector where the level of output in 1999 is higher (by about 39 percent) than the corresponding level in 1990. All other branches of the economy show marked declines. Inflation has been low in recent years and the Armenian Dram has been stable at around 500-540 to the US dollar since 1997.

Inadequate transport and access to markets remain major obstacles to development and employment. The country is land-locked. Direct road and rail links to Azerbaijan and Turkey are still closed and the country only has one rail link, that to the ports of Poti and Batumi in Georgia, where goods have to be transshipped to export markets in the CIS or further afield. This is expensive, time consuming and difficult to schedule, and increases the cost of imports and undermines the competitiveness of Armenian exports. The country relies on imports of fuel, semi- finished products, some agricultural inputs, and (currently) about one third of its food supplies. Bottlenecks in the supply of necessary inputs for the limited domestic agri-food and industrial production compound the difficulties of scheduling production and exports. The domestic market is small and contracting and has limited purchasing power. Without export markets, the country lacks adequate markets for much of its agricultural production, as well as the economies of scale for the investments in agri-processing and manufacturing industry which are necessary to stimulate employment and household/farm income.

The transition to a market based economy, the critical shortage of energy, the earthquake in 1988 and the virtual collapse of the industrial sector, have resulted in large-scale under- and unemployment which has persisted throughout the decade. Registered unemployment in 1999 was in excess of 175 000 people (12 percent of the labour force). In addition there are long arrears in the payment of salaries particularly in the state sector. Inadequate employment opportunities have led to seasonal or total emigration from the country, particularly of able-bodied men, in search of work and income, part of which is remitted to families in Armenia. As a result of emigration, the falling birth rate and rising death rate, the resident population is well below the official figure of 3.8 million, which is based on an extrapolation of the 1989 population census data. Estimates of the resident population vary, ranging from as low as 1.7 to 3 million. Regulation of immigration of Caucasian citizens into Russia has apparently had less impact on Armenia than on neighbouring countries and estimates of the inflow of remittances are being increased. Remittances from abroad are an important supplement to domestically earned incomes and benefits, but are difficult to evaluate.

Privatization is well advanced. By mid-1999 over 85 percent of small enterprises and 75 percent of medium and large enterprises had been privatized, often however, without generating the critical amount of foreign investment to upgrade facilities/technologies and generate remunerative employment. In 1998 the private sector accounted for about 75 percent of GDP and about 60 percent of employment. Private enterprise produces over 98 percent of output in agriculture; its contribution in the other sectors is less. The legal basis for the private sector has been significantly improved in recent years, but nevertheless, is incomplete. Indeed, the institutional climate for investment and private enterprise remains far from optimal.

2.2 Developments in Agriculture

Agriculture contributes about one-third to GDP and accounts for 42 percent of employment. Crop production, which is vulnerable to weather conditions (precipitation and hail) and experiences considerable annual variation, accounts for roughly 60 percent of agricultural output and livestock production about 40 percent.

Land privatization was initiated in 1991 and was the single most important factor contributing to household food security during the critical years 1991-1995. Family farms cultivate or use most of the available land resource through a combination of private ownership and leasing of state lands. Some 320 000 farmers have received small farms, - with scattered parcels of land - averaging between 1.4 - 1.7 hectares of arable land. In practice, given emigration, and the ability to lease land from the state reserve, some farmers are farming considerably larger plots. Unofficial land consolidation has occurred but leased land is primarily used for pasture. Land may be legally sold, mortgaged, leased and subleased but officially registered land transactions are few. The land market is severely constrained by the high cadastral value of land, - well above current market prices - fixed by the government, and the need to pay a substantial tax in cash based on the cadastral value when registering transactions.

Farmers are free to determine which crops to sow and where to sell them. Their options are limited by numerous physical, financial, institutional and above all marketing constraints but the need to ensure household survival has made farms resourceful and far from being only subsistence farms.

2.3 Constraints

Agricultural production, and cereal production in particular, is likely to be influenced by the following factors for some time:

2.3.1 Physical constraints

Arable land is limited. The country is mountainous, with only 28 percent of land below 1500 metres altitude. Topography and climatic conditions, soil fertility and the access to irrigation water vary greatly and affect yields. With only 20 percent of the land suitable for cropping (other than pasture), small holdings and about 60 percent of the cropped land sown to cereals, crop rotation schedules are not being respected, even in the fertile valleys. With inadequate use of fertilizer over a decade, lack of adequate drainage in the valleys (30 000 hectares are saline), soil erosion (many trees were felled in 1993-1994 for fuel to cope with energy shortages), degradation of pastures, and pollution, yield potential is undermined.

Rainfall in the crucial period May-August is inadequate and irrigation is necessary to ensure satisfactory crop development. Only 220 000 hectares of the 284 000 hectares of irrigated land are effectively irrigated now and maintenance of the system remains inadequate. Water charges are levied but payment rates are poor. Water charges are still partially subsidized by the government. However, investment in the establishment, reconstruction and the development of a sustainable irrigation system, including water user organizations to ensure cost recovery, is considerable and ongoing.

2.3.2 Financial

The bulk of agricultural land has been privatized but there is little support for small farmers. Farmers, like the rest of the population, have been impoverished by hyperinflation in the early nineties and limited earning opportunities. Access to formal credit for many small farmers remains difficult, not because credit is unavailable but because both collateral and sustainable disbursement opportunities are limited1. As a result, access to quality inputs and machinery is difficult. Nevertheless, a number of credit schemes are underway and about half of farmers in 1997 managed to mobilize some credit from family or friends. Already in 1998, nearly 60 percent of farmers had some irrigation on about half of their land, 70 percent purchased fuel and about half purchased some fertilizer, usually only nitrogenous. A domestically produced herbicide is now available.

2.3.3 Institutional

Institutional shortcomings exacerbate the above constraints. The government has drawn up a strategy for the development of an enabling environment for agriculture, and passed a large number of laws but in recent years progress in key areas has stagnated due to political turmoil and inaction. In addition, effective implementation of the laws passed requires a host of subsidiary changes to the government apparatus including training, regular and adequate salaries in the public service, systematic and transparent control mechanisms, as well as a more encouraging attitude to private enterprise. Import and export trade is monitored but tax (and in particular VAT) collection remains problematic.

2.3.4 Marketing

Marketing constraints are possibly the chief obstacle to increasing farm income and the most difficult for farmers to overcome. The geopolitical constraints, (pending resolution of the issue of Nagorno Karabakh) and the uncertain timing of arrival and of transshipment of goods at Poti, make export of fresh produce virtually impossible, except by air, and that of processed products expensive. Despite progress in re-establishing some agro-processing capacity in the last few years2, a large number of food and agro-processing enterprises (including some large wheat mills) are not working or are working at very low capacity, reducing the competitiveness of output. The bulk of the population has very limited purchasing power and auto-consumption and barter probably account for up to two thirds of consumption of all domestic produce. Appropriate marketing and transport infrastructure for small farmers is lacking. Roads are poor and transport is expensive. As a result, there are seasonal surpluses of perishable produce (e.g. of potatoes) while shortages persist elsewhere. The barter rate of potatoes for wheat ranges from 1:1 to 3:1. Moreover, there is no market information system, with the result that many farmers in an area tend to produce the same crops if they were previously profitable, causing a glut.

However, farmers are resourceful. Although marketing of surplus produce over household consumption is both difficult and expensive, a World Bank survey carried out in 1998 found that 80 percent of farmers reported some sales of produce. On average farms marketed roughly three quarters of beef, pork and melon production, between 60-70 percent of other fruit, grape, and vegetable production, roughly one third of potato output and one fifth of grain and milk production.3 Food processing in 1998 represented only 16.5 percent of industrial output but this has increased subsequently.

The rate of recovery from the shocks of the transition differs between farms, depending on their natural endowment, proximity to solvent markets and management. In mountainous/ remote/insecure areas, the limited crop/market choice and the need to ensure household food security often keeps farmers in a progressively lower input lower output scenario. Thus in Syunik marz, some farmers are obtaining wheat yields of 750 kg/ha using 250-300 kg of seed per hectare. In the colder mountainous regions, the production choices are limited to rainfed wheat/potato/hardy vegetables and livestock/fodder crop farming. Wheat production, even if yields are low and uncertain, is important to ensure household food security in an environment where cash is in short supply. In the more fertile valleys, provided the irrigation system is operational, farmers have a wider choice. Once household food supplies are ensured, their choice is determined largely by the expectation of markets for their crops. In view of existing market conditions, cereal production guarantees a low level of income per hectare, and cereals are relatively easy to produce and store. Nevertheless, there are indications that the trend of wheat displacing more intensive fruit/vegetable farming is being halted if not reversed. New vineyards are now being established and the area sown to tobacco is increasing, in the wake of foreign investment in these industries.

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3. Food Production and CONSUMPTION IN 1999 and 2000

The quantitative implications of the above factors for the areas planted, yield and production of food crops are difficult to assess. One of the major problems of reviewing developments in agricultural and food production is the absence of data reflecting the complex nature of the ongoing developments. Budget constraints mean that there are inadequate funds and institutional support for data collection. There is a tradition of not providing accurate information to the authorities and there is no guarantee of the confidentiality of the information provided. Official data is currently based on the reports of farming organizations and a survey of 7000 small farmers but actual yields are not measured. Some data could be misleading on account of the overlapping of the private/state economy. For example, while 100 000 hectares of agricultural land are officially reported to be unused, this may not all be lying idle and is quite likely sub-leased for use as pasture. Although official statistics may not reflect actual developments, there is no alternative source on which to base national estimates. A detailed Household Survey is to be carried out this year.

3.1 Food Production

As can be seen in the table below, official data indicate that the aggregate area sown to crops fell steadily until 1998. The bulk of the decline was in fodder and cash crops requiring processing, notably fruit and grapes. In response to the blockade, the aggregate area sown to cereals increased steadily until 1997, reflecting an increase in the area sown to wheat. This increase was probably sharper than shown by official data as grubbing up of vineyards and fruit trees was illegal in the early nineties but nevertheless occurred. On farm, there are indications of a reversal in these trends, now that there is a nascent market for quality grapes and tobacco and, increasingly for domestic livestock products. Import competition for wheat since privatization of the import/distribution chain also plays a part in years of low international or regional wheat prices, but only a small percentage (40 000 to 45 000 tonnes) of the domestic wheat crop is officially reported to be marketed to the larger mills. (In 1998/99 the area sown to wheat was also reduced as a result of dry conditions in the autumn). The area sown to fodder crops is again increasing (and could be higher than indicated by the statistics) reflecting land leasing operations and good demand for domestic livestock products.

3.2 The Outlook for 2000

The outlook for agricultural production in general and cereal production in particular in 2000 remains uncertain. Growing conditions had been good until May but persistent hot and dry conditions since early June are sapping yield potential. Good snow cover protected crops from winterkill and replenished soil moisture and irrigation water reserves after last year's dry conditions. Hail damage to crops has been very limited this year and the fruit harvest is likely to be good. However, spring planted crops (potatoes, vegetables, spring grains, fodder) and late harvested winter crops, without adequate access to irrigation are at risk. Early indications are that 55-60 percent of crops in the mountainous areas in Geghrakounik, Aragatsotn, Taush, Shirak marzes, which rely on natural precipitation, could be damaged to some extent. The yield of potato could also be affected. Irrigated crops in the Ararat Valley are not so affected also as.

The area sown to winter cereals in the fall of 1999 for harvest in 2000 is officially estimated at 100 000 hectares. However, there is still uncertainty if the target for the total area to be sown to cereals for harvest this year - 190 000 hectares -has been achieved. Given that the trend in official spring grain planting data has been downwards, fuel prices high and earning from barley less than for wheat, this estimate could be high. Given the late season hot dry spell, crop yields may not be higher than last year's, and the target output of 320 000 tonnes may not be achieved.

Table 1: Armenia - Trends Agricultural Production (Area `000 hectares; Production `000 tonnes)

 
1991
1996
1997
1998
1999
2000/011/
Total area sown
417
347
335
324
328
370
Fodder crops area
213
105
80
69
94
122
TOTAL GRAINS
           
Area
153
184
199
199
176
170
Yield (kg/ha)
1 954
1 734
1 296
1 638
1 710
1 882
Production
299
319
258
326
301
300
WHEAT
           
Area
80
93
113
124
112
107
Yield (kg/ha)
2 138
2 108
1 584
1 927
1 911
1 963
Production
171
196
179
239
214
210
BARLEY
           
Area
65
77
74
64
51
50
Yield (kg/ha)
1 785
1 325
797
1 109
1 275
1 300
Production
116
102
59
71
65
65
POTATOES
           
Area
23
33
33
33
32
32
Yield (kg/ha)
11 957
12 818
10 909
13 333
12 938
12 500
Production
275
423
360
440
414
400
VEGETABLES
           
Area
22
21
20
19
21
20
Yield (kg/ha)
20 136
21 190
18 450
20 789
21 381
20 000
Production
443
445
369
395
449
400
FRUIT
           
Area
46
NA
24.9
21.6
22.5
NA
Yield (kg/ha)
4 717
NA
4 378
5 880
3916
NA
Production
217
NA
109
127
88.1
NA
GRAPES
           
Area
27
NA
17.8
15.7
15.7
NA
Yield (kg/ha)
7 815
NA
6 067
6 752
7 325
NA
Production
211
NA
108
106
115
NA
LIVESTOCK PRODUCTION
           
Meat (liveweight '000 tonnes)
133
83
84
86
86
86
Milk ('000 litres)
412
431
435
457
466
480
Eggs (millions)
482
192
191
219
326
350

1/ FAO Forecast
NA = Not available.
Source: National Statistics Office of Armenia and FAO forecasts.

The officially reported average yield of most crops in recent years (1998 and 1999) is lower than in 1991, reflecting the difficult situation of many farmers, progressive loss of soil fertility, as well as the increased incidence of crop damage by hail and winterkill. While below-normal precipitation, winterkill and hail damage affected crops in 1999, the weather in 1998 was favourable for agriculture. However, there is considerable uncertainty and difference of opinion on the reliability of official data on area and yield and therefore production. Some informed sources, e.g. the World Bank Irrigation Project indicate that average yields are underestimated, indicating average wheat yields of 5 tonnes/hectare in the Ararat Valley and an average yield in the country as a whole of 2.7- 3 tonnes/ha. The Mission found little evidence of such high yields. In the Ararat valley, wheat seed fields, enriched with 1 or at most 2 applications of only nitrogen fertilizer and herbicide yielding 2 to 3.5 tonnes/ha were observed. In other areas, farmers reported average yields of 1.3-2.0 tonnes per hectare. The Mission also noted that farmers quote bunker weights, which can be up to 20 percent higher than the cleaned and dried weight of wheat. Only a representative survey can settle this issue. A partial survey of crop yields in Syunik marz would appear to confirm both underestimation of yields of cereals and potatoes and overestimation of other crops.

Table 2: Syunik Marz: Comparison of Yield between STZ - Survey and Official Data (kg/hectare)

   
Cereals
Wheat
Barley
Potatoes
Grape
Winter
Spring
Goris
1 302
     
15 660
 
Sissian
 
1 781
1 850
1 334
27 389
 
Kapan
1 173
         
Syunik marz
1 500
     
21 720
6 510
1998 official
1 020
1 130
720
780
12 680
2 880
1999 official
800
790
1 690
800
14 360
7 470

Crop production in 1999 was affected by poor snowfall, crop damage by winterkill and untimely hail, yet the official estimate of the cereal harvest is not significantly lower than in the preceding year. Fruit production suffered from hail damage, but the yield of grapes and vegetables in 1999 was higher than in 1998.

Official data indicates that livestock inventories remain well below those of 1991, with the exception of dairy cows. Investment in an intensive poultry enterprise has led to a sharp increase in poultry (mainly egg) production in 1999. Production of milk continued to increase. Meat production in 1999 apparently remained stable, at about two-thirds the level in 1991, but the productivity of pigs increased. In the Yerevan markets, the availability of domestically produced pork, beef, and eggs and pasteurized dairy products had improved markedly since the Mission's last visit in 1996.

3.3 Food Consumption

Uncertainty about the actual level of production and the resident population crucially affects the reliability of the estimates of consumption. The staple foodcrops are cereals and potatoes, supplemented by fruit, vegetables and nuts in season, (which are preserved- dried, bottled and canned) for consumption during the winter months. Cheese is an important source of protein and pork is the preferred meat. In mountainous areas, potatoes can be cheaper than wheat, (much of which has to be imported) and become the staple. As family farms tend to be mixed, rural households, with access to land, have in many cases, better access to food than the urban populations, particularly the poor. In 1998 for example, levels of auto consumption on family farms varied from about 90 percent of poultry meat, 80 percent of milk and eggs, 60 percent of cereals, 30-40 percent of fruit and vegetables, roughly one third of potatoes and one fifth of beef and pork production. Domestic food production is supplemented by imports, notably of processed products (including sugar), cereals, livestock products and oils and fats. Imports of beef, pork, and eggs have fallen sharply in recent years.

3.4 Cereal Consumption

Annual imports of cereals are the only firm statistic available on which to draw up a cereal balance. They are registered at the border and have averaged some 370 000 tonnes, with flour converted to wheat equivalent, per annum since 1994/95. The bulk (some 350 000 tonnes) is wheat and flour. Imports increased sharply in 1997/98 but declined in the following year. Following the introduction of 20 percent VAT on flour, the proportion of wheat in imports has increased. The privatized wheat/bread marketing and distribution system, although not transparent, is functioning and there are no shortages. Since the 1998/99 marketing year, the bulk of imports is mobilized commercially. Cereal food aid deliveries have tapered off from 440 000 tonnes in 1994/95 to 15 000 tonnes in 1999/2000. Bulk wheat to be monetized as budget assistance was last received in 1998 and auctioned in 1999. Meanwhile deliveries of food aid for humanitarian needs continue to be necessary. There has been a noticeable increase in the interest in WFP food for work programmes in the winter of 2000 reflecting the deterioration in the socio-economic conditions of the more vulnerable.

In the 2000/01 marketing year (July/June) commercial imports of cereals are again likely to fully cover effective demand, and are tentatively estimated at 418 000 tonnes, similar to estimated imports in 1999/2000, and include 25 000 tonnes of food aid, mainly wheat for targeted distribution. Given the margins of error in the population and production data, demand estimates are tentative. With a resident population of 2.5 million and an estimated per caput cereal consumption of nearly 160 kg per annum, the aggregate cereal food use is estimated at 400 000 tonnes. Other uses are estimated at 117 000 tonnes including seed use of about 50 000 tonnes, (seeding rates are high 250-300 kg per hectare) and losses of about 5 percent. Use of cereals for distilling has increased sharply in recent years. Livestock productivity, particularly of pork and poultry is increasing pointing to increased availability and feed use of grain in addition to pasture, fodder crops, straw and bran. Feed use of grain is tentatively forecast at 196 000 tonnes. All of these estimates are very tentative.

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4. The Food Supply AND FOOD SECURITY Situation

4.1 The Food Supply Situation

There is more food available in the domestic market than people can afford to buy. Off-take on the observed markets, urban and rural, was slow at the time of the Mission. Urban markets, notably Yerevan, are well supplied, with a mix of domestic and imported fresh and processed products. Imported frozen meat and poultry is available (and cheaper than domestic production) but there is a marked quality differential with local produce, which is preferred by those with purchasing power. The inundation of urban markets with imported meat, processed produce, wheat and flour, characteristic of neighbouring countries, is less in evidence. However, the large domestic processors of sausage and flour tend to prefer imported bulk foods in view of their lower cost and more consistent quality, better suited for industrial processing. Urban markets are markedly better patronized than rural markets and have a wider selection of produce, reflecting also farmers' tendency to consume own produce and to barter. In addition there are large seasonal gluts of domestic produce and localized shortages.

4.2 Food Security

Food security is primarily determined by effective ownership (cultivation) of land, and the availability of purchasing power, be it from earnings, benefits, savings or remittances. Rural and urban populations with access to land are often in a better position to supply their food needs, but diets can become monotonous and poorly balanced, with shortages of micro-nutrients. Both the quality of the land, the security of tenure (notably in the border areas) and the ability to cultivate are all factors which need to be considered. Most rural households own one or more animals, a source of protein (milk) and savings. Animals can be sold in December to generate cash for purchases in the winter months - which can nevertheless become lean - and for inputs. At the same time, populations in rural areas without effective access to land and dependent on employment/benefits are amongst the poorest and most vulnerable in the country. These include concentrations of (former) employees of state industries situated in rural areas.

At the national level the main reasons why households remain poor are lack of remunerative employment opportunities or capital for investment in private activities, low wages, lack of mobility, poor health and physical isolation.4 The number of poor and food insecure vary with the criteria used but nevertheless remain considerable. The World Bank, based on a survey in 1996/97 classified over half of the population as poor, defined viz. - a- viz. the national poverty line and 28 percent as "food poor", i.e. with a purchasing power below the cost of an adequate, defined food basket. Incomes have polarized further since 1996/97. The Gini coefficient, which shows the inequality of distribution of the national income, deteriorated from 0.601 in 1996 to 0.690 in 1998/99.

Failure to meet certain macro economic targets and delays in the disbursement of foreign assistance has created a very difficult budget situation. Arrears of up to 8 months in the payment of salaries for employees dependent on the state budget, as well as the contraction in the basic social security payment and the number of beneficiaries have increased hardship. After many years of structural adjustment and substantial unemployment, a large portion of the population has very little safeguard against poverty, as illustrated by the increased interest in WFP Food for Work projects in 2000. Poverty is officially reported to be increasing in the urban/industrial sector. In addition, most households are exposed to seasonal fluctuations in food availability, salary and benefit arrears, salary arrears, occurrences of ill health or interruptions of remittances or non-formal earnings, making them vulnerable to transient poverty.

In 1995, the Government, supported by United States Agency for International Development (USAID), initiated a poverty assessment system, known as PAROS (meaning "Beacon" in Armenian), which has been extensively used by WFP and NGOs to streamline targeting of humanitarian aid. PAROS assesses the vulnerability of each household/family, taking into account:

Numerical values are assigned to each variable and a vulnerability index is calculated for each household. The higher the index, the more vulnerable the family is considered. PAROS is a dynamic system and assistance allocated through it is included as part of the family income. Registration with PAROS is voluntary, and in total 850 000 have registered. The most vulnerable population has been estimated at 96 000 households, or 400 000 individuals (including refugees and IDPs) that are currently assisted with relief food aid from WFP and NGOs. Initially intended only for targeting humanitarian assistance, the system is also used to target the Government's Family Benefit System implementation. Currently financial constraints limit FBS payments to 230 000 households, excluding 200 000 households who are also vulnerable.

The most vulnerable are the single pensioners, 15-20 percent (100 000) of whom live on the state pension, equivalent to US$7.5 per month, while the cost of the minimum consumer basket is put at US$60 per month for a family of 4. ($40 for food expenses and US$20 for non-food expenses)5. The diet of the vulnerable is mainly limited to bread, potatoes, rice and cabbage, and supplementary food assistance is needed to maintain nutritional status. The situation of refugees, IDPs and earthquake victims is further aggravated by deplorable living conditions in temporary accommodation, providing neither appropriate hygiene nor sufficient shelter during the harsh winter months.

Geographically, the higher concentration of vulnerable people is found in the earthquake zone in the north (especially in urban centers), the areas bordering Azerbaijan, in pockets of the outskirts of Yerevan, and in the far south. Despite this geographical concentration, no area in Armenia can be completely excluded from humanitarian assistance schemes.

4.3 WFP Food assistance

The World Food Programme has been providing humanitarian assistance to Armenia since 1993 through emergency operations. Presently, WFP is providing humanitarian assistance to 170 000 vulnerable people under a Protracted Relief and Recovery Operation (PRRO 6120.01) covering the period from 1 January to 31 December 2000. WFP interventions primarily target refugees, internally displaced and vulnerable people, including orphans, multiple children families, disabled, dwellers in temporary lodgings, pensioners and single pensioners who look after children. WFP's intervention is two-tiered: humanitarian relief rations allocated through the PAROS-vulnerability system for the socially vulnerable and a Food for Work (FFW) programme for the able-bodied.

The relief ration programme aims at improving the nutritional status of people at risk by providing supplementary food, necessary to maintain daily caloric intake, and to cushion the negative results of the new reduced national welfare system. Food insecurity for the most vulnerable groups is chronic, but the overall food availability is worse in the winter months when extra calories are needed to cope with the harsh climatic conditions and lack of heating and proper housing. Therefore, WFP is implementing a 9 months feeding programme (January to May and September to December), The target population for the relief food distribution is 100 000 households. Although in principle refugees and IDPs are incorporated into the PAROS database and targeted using the same vulnerability criteria as the resident population, WFP recognizes the fact that not all refugees are registered in PAROS (mainly those living in collective centers) and adds 10 000 food rations to be distributed under the responsibility of UNHCR and the Department of Migration and Refugees. In the summer months, WFP also assists 15 000 women-headed households in economically depressed urban areas with extra rations of vegetable oil and sugar under the relief food aid, to undertake food preservation for the winter months.

As unemployment is a major cause for poverty, FFW provides a means of income transfer to the able-bodied but unemployed, vulnerable population. The overall objective of the FFW programme is to enhance household food security in the short to medium term while creating/upgrading communal assets to improve food production, health, and living conditions. Major areas of FFW activities, which complement the strategies of the international donor agencies in the country, include: drinking water/sewerage system repair/construction; repair/construction of housing (for refugees as well as earthquake victims); repair/construction of public building (schools, clinics and kindergartens); rehabilitation/creation of farmland, orchards, agro-forestry and vineyards; and construction of food processing facilities. As FFW projects are mainly submitted by local communities, their successful implementation also depends on the availability of resources to purchase essential non-food items, i.e. tools and construction materials required for repair and construction activities.

This report is prepared on the responsibility of the FAO and WFP Secretariats with information from official and unofficial sources. Since conditions may change rapidly, please contact the undersigned for further information if required.
Abdur Rashid
Chief, GIEWS FAO
Fax: 0039-06-5705-4495
E-mail: GIEWS1@FAO.ORG
Erika Joergensen
WFP Rep. & Country Director
Fax: 00374-1-151-725
E-Mail: Erika.Joergensen@wfp.org
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1 The availability of credit for the agrarian sector has increased sharply in recent years, (from 2 billion drams in 1996 to 20 billion drams in 1999, including nearly 3 billion-dram credit allocations for the irrigation system and nearly 12 million drams made available by international programmes). (500-540 drams = US$1)

2 Notably in dairy and poultry production, fruit and vegetable processing (fruit juices, jams, tomato paste) and viticulture (brandy and wine).

3 Armenia's Private Agriculture. 1998 Survey of Family Farms, World Bank.

4 Improving Social Assistance In Armenia, World Bank, 1999

5 The average monthly nominal wage is about US$35.00.