Expert: Armenia inefficiently uses external borrowing

ArmInfo. Until now, the credit  funds attracted by Armenia have been used rather inefficiently. Head  of the Employers' Union of Armenia Gagik Makaryan expressed this  opinion at a meeting with journalists.

In particular, as stated by Makaryan, the excessive dispersion of  funds can be stated with confidence in the sphere of education,  ecology, road construction, community management. The reason is that,  according to the expert, very often political interests prevail over  economic and social interests.

In addition, according to the economist, the previous two issues of  Eurobonds turned out to be ineffective.  "It was a utopia, and their  effectiveness is not clear to me personally," he said. At the same  time, he expressed hope that the next tranche will be implemented  with greater care, since the early ones were initiated by the former  government of Armenia.

Nevertheless, the expert does not see any problems in terms of  servicing the growing national debt of the country, but only if the  outpacing rates of economic growth remain. "We can not say that  servicing the national debt will be easy, especially in 2020, but I  think we will manage," concluded the head of the Union of Workers.   By now Armenia has carried out two issues of Eurobonds. The first  issue was made on September 19, 2013 - by $ 700 million and the  government repaid ahead of schedule the loan taken from Russia for $  500 million. The second tranche of sovereign bonds worth $ 500  million for a period of 10 years and with a yield of 7.5% Armenia  carried out 19 March 2015. The proceeds from the second issue of  Eurobonds were $ 487 million. Part of the amount received from the  sale of the bond tranches, in the amount of $ 205 million, went for  the purchase of the first issue of Eurobonds with maturity in 2020.  The remaining amount was transferred to the treasury account of the  Republic of Armenia and the country's budget system. As the experts  stated, this, in fact, was the most expensive external debt that was  ever attracted by the government of the country.

As Arshaluys Margaryan, the head of the State Debt Department of the  Ministry of Finance of Armenia, told ArmInfo the year before, the  Armenian government plans to issue a new issue of Eurobonds only in  early 2020. According to him, if by the end of 2019 Armenia does not  face an unconventional situation, when the only solution is a new  issue of Eurobonds, another issue is expected to ensure the repayment  of the state debt in 2020. The volume of the issue, as noted by  Margaryan, will be similar to the amount that will be spent on  servicing the state debt on Eurobonds - $ 500 million or even  slightly higher.

Meanwhile, according to the National Statistical Service, the  aggregate state debt of Armenia at the end of 2017 amounted to $  6.774.6 million, an increase of 14% or $ 832.5 million compared to  the end of 2016. At the same time, the external state debt of the  republic at the end of 2017 was $ 5 494.9 million, an increase over  the year by 14.3%, or by $ 689.3 million. According to the State Debt  Strategy for 2018-2020, in 2018, $ 666 million will be allocated for  debt servicing, in 2019 - $ 710.7 million, and in 2020 - already $  1.37 billion. The growing national debt and continuing migration in  Armenia have already deepened the specific debt burden per capita to  $ 2.3 thousand by January 1, 2018, of which over $ 1.8 thousand comes  from external debt, against $ 2 thousand and $ 1.6 thousand  respectively, by January 1, 2017. Given the actual scale of  migration, the burden of public debt per capita would be much higher.  According to statistical data, as of January 1, 2018 the population  of the RA amounted to 2.973 million, against 2.986 million a year  earlier and 3.274 million five years earlier.

According to the budget, by the end of 2018, the state debt, from $  6.8 billion by the end of this year, will grow to $ 7.2 billion and  amount to 60% of GDP. According to the World Bank forecasts, the  share of Armenia's national debt in GDP will grow to 59.6% in 2018,  from 58.9% in 2017, and the external debt to 48.4% from 47.9% in  2017. In 2019, the World Bank predicts a decline in the share of  public debt in GDP to 59.3%, and external debt in GDP - up to 48%.