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.