Former State Minister of Artsakh: Due to fear of increasing state  debt, Armenia risks falling behind the pace of global economic growth

ArmInfo.Former State Minister of Artsakh Arayik Harutyunyan believes that to ensure economic growth, Armenia needs to attract external borrowing and not be afraid  of increasing the level of public debt. This is stated in his open  letter to Armenian Prime Minister Nikol Pashinyan.

According to him, the recent discussions on the public debt of  Armenia in the press and in expert circles, in particular, on the  need to reduce foreign debt and increase risks at the expense of  future generations, are unacceptable.

In this address, addressed to the head of the Armenian government,  Harutyunyan calls such an approach pessimistic, not taking into  account the possibilities and tried and tested methods of economic  growth. As a result, according to him, Armenia may lag behind the  growth rate of the world economy.

According to him, the most important challenge for Armenia in this "  fateful moment " is the imperative of consistently ensuring the  necessary level of economic growth, which will determine not only  social and economic growth, but also the solution of issues related  to demography and security.

Arayik Harutyunyan reminds that, according to international experts,  the world nominal GDP per capita is about $ 10 thousand, and in  Armenia - $ 4 thousand. According to this indicator, Armenia is not  among the first 100 countries of the world. Meanwhile, according to  various forecasts, in the coming years, the y-o-y growth of the world  economy will average 3%, which means a y-o-y increase in the GDP per  capita of $ 300. "If Armenia does not want to fall further behind the  growth rates of the global economy, it must accordingly increase GDP  per capita and ensure y-o-y growth of at least 7.5%," the letter  says.

According to Harutyunyan, the only way to achieve a given goal is to  attract investments. "According to our calculations, if in the  conditions of the current GDP, Armenia needs y-o-y investment of $  4bn, then in 5-7 years the investment need will reach $ 7-8bn. Direct  investment is impossible to ensure this level. It is necessary to  attract financial resources through state and other channels. This is  mainly about attracting foreign borrowing, "the author notes.

At first glance, according to Harutyunyan, a call for an increase in  debt may look strange. Nevertheless, as he points out, an analysis of  global trends indicates the reasonableness of this approach. "The  consolidated debt of Armenia (in terms of the state, households and  trade organizations) is about $ 12-13 billion, and per capita is $ 4  thousand, which is approximately $ 29 thousand less than the world  average. If the global consolidated national debt is about 32% of  total debt, the indicator in Armenia is almost 50%, "the statement  says. According to the former state minister, comparing the  indicators of the state debt of Armenia with the developed and rich  countries, we can say that Armenia is a country with a very low debt  burden, both in terms of debt / per capita and in relation to GDP.

According to Harutyunyan, in the future, Armenia will not also face  the problem of servicing the state debt. "If we take into account  that $ 1 in GDP provides additional tax revenues to the state  treasury at $ 0.2, and debt servicing at $ 1 costs as much as $ 0.07,  and in the future, I am sure, less, then debt servicing is not a very  problematic issue (i.e. pay 7 cents, while receiving 20 cents.) At  the same time, this calculation does not take into account the  multiplier effect of attracting funds to the economy of the republic,  which in the future will provide additional revenues to the state  budget, "said Arayik Harutyunyan. At the same time, he points to a  rule that states that external borrowing should be directed solely  towards capital expenditures and the implementation of infrastructure  projects.