Thursday, November 23 2017 19:09

ArmInfo. Armenia is going to  mitigate fiscal rules and is making adjustments in regulating the  permissible level of public debt in the country's GDP to stimulate  economic growth. The Armenian government approved amendments and  additions to the laws "On the Budget System" and "On the State Debt"  on November 23 at the meeting.

As the Minister of Finance Vardan Aramyan said, presenting the bill,  the legislative initiative on the establishment of new fiscal rules  was discussed at various venues, both with representatives of  academia, both parliamentarians and the public through Mass Media.

According to the Minister of Finance, back in June 2017 the  International Monetary Fund (IMF) provided technical assistance to  the Ministry of Finance. As explained by the minister, the main  problem is that the current regulation of fiscal rules is pretty  tough. Proceeding from this, the Armenian financial department  appealed to the IMF to assist in reforming the fiscal rules, so as  not to weaken, on the one hand, but at the same time have the  flexibility to continuously maintain economic growth. The goal, as  Aramyan pointed out, is to support the economy of the republic during  the recession, and in the period of take-off growth, it is possible  to accumulate the appropriate airbags for a rainy day.

The head of the Armenian Ministry of Finance recalled that within the  framework of the current law "On State Debt" there are norms  according to which, as of December 31 of this year, should not exceed  60% of GDP for the past year. If the state debt by the state on  December 31 of this year exceeds 50% of GDP for the last year, then  the deficit of the state budget for the next year should not exceed  3% of the average GDP for the last three years. The government's  transactions that do not comply with this requirement will be null  and void by law. "This approach to managing the national debt is  excessively strict, and countries with such legislative regulation,  one by one, are reviewing this rule of law, basically setting the  rules for the expenditure policy, which was followed by the Armenian  Ministry of Finance," the head of the department said. According to  Vardan Aramyan, according to IMF recommendations, it is proposed to  provide three thresholds for the level of public debt - 40%, 50% and  60% for the medium and long term. If the threshold of the national  debt exceeds 40%, capital expenditures should exceed the deficit of  the state budget. "It is this philosophy that follows the draft state  budget for 2018," he stressed. When the 50% norm is exceeded, the  requirements are toughened and, in addition to the previous  requirement, restrictions are imposed on current expenses. Approaches  are further tightened after the national debt exceeds 60% of GDP and  current expenditures are linked to domestic revenues.

Earlier, in October 2017, answering the question of ArmInfo, Vardan  Aramyan stated that the Armenian Ministry of Finance allows for the  removal of restrictions on increasing the external debt. As the head  of the Ministry of Finance pointed out, at the time of economic  upheavals or in the event of force majeure, a law may be revised that  provides for restrictions on attracting new foreign loans.