Economist: Risks on Armenia`s public debt will not arise if the government provides 5% or more economic growth

ArmInfo. "Risks will not arise if the government undertakes to create conditions for 5% or more economic growth, otherwise, such government should resign," Margaryan Head of the Center for Innovative and Institutional Research at the YSU told ArmInfo. According to the expert, one should not be afraid of possible changes in the permissible threshold of the national debt to GDP, as well as the prospects of exceeding the deficit level.

The danger of national debt can arise if Armenia, due to force majeure circumstances in the economy, fails to provide planned tax revenues to the state treasury. It is fraught with complications if Armenia fails to timely implement the third tranche of Eurobonds planned for 2020. "Unfortunately, Armenia today covers part of its debt obligations by accessing the international securities market, and this is not a good life. If international rating agencies, for a number of reasons, recognize Armenia's fiscal policy unreasonable and substantially reduce the country's rating, it will make it more difficult for the new Eurobonds to be issued in 2020, the republic will not be able to fulfill its obligations to the long-term shareholders of the Republic of Armenia in time, due to which it will be recognized as insolvent," he explained.

"If you need to build funds from the outside, you must not refuse. If we need to build a North-South and irrigation systems for credit, then we have to build, since most of the external borrowings, for example, from the World Bank, were provided to the republic almost for free", he declared. As the economist noted, long-term loans, for example, with a repayment term of 40 years, can be considered to have been allocated to Armenia, in fact, interest-free, since during this time inflation depreciates them and the republic does not return even 3/4 of the borrowing amount. "It's another matter that a thief should be in prison," he stressed.

However, the life of cheap loans is drawing to a close. As Atom Margaryan explained, the republic passed the period when it was given cheap and long-term loans for reforms in the sphere of fighting corruption, reducing the shadow economy, etc. "As a result, we created more problems than we solved." Today, according to my calculations, corruption still absorbs at least 10% of GDP, that is, about 1 billion. "How to identify corruption is a task that the new framework agreement with the EU will help us," he said. "We will be under the close supervision of European officials who will step by step describe our actions to us," the expert concluded.

At the end of 2017, the current government debt will reach 55.1% of GDP from last year's 51.8%. The authors of the draft budget for the next year promise that the ratio of public debt to GDP in 2018 will be reduced by one percentage point - up to 54.1% of GDP. However, this prospect "shines" in conditions of ensuring again the promised 4.5% GDP growth, which in turn is due to growth expectations at the level of 4.3% by the end of this year. In the opposite case, the figures will change only by increasing. In the meantime, according to the State Debt Strategy for 2018-2020, in 2018, the amount of $ 666 million is planned for debt servicing, in 2019 - $ 710.7 million, and in 2020 - $ 1.37 billion. (estimated rate of 1 USD is 483.83 AMD).