ArmInfo.Head of the Ministry of Economic Development and Investments of Armenia, Tigran Khachatryan, believes that the republic can afford to reconsider the upper permissible threshold of state debt "if there are plans to spend loans in areas that guarantee results." He stated this on April 11 in an interview with journalists.
Earlier, on March 19, at a large press conference, Armenian Prime Minister Nikol Pashinyan stated that in the coming days, the Armenian government together with the Central Bank and the expert community will discuss a possible revision of the acceptable threshold of state debt to GDP. The head of the Armenian government reminded that during his last visit to Brussels it became obvious that the European Union was ready to finance the implementation of development programs in Armenia. According to him, in order to take part in the implementation of the planned programs, Armenia should think about attracting additional resources from abroad. But here, as Pashinyan pointed out, there is a sensitive problem related to the legislative limitation of the ratio of public debt to GDP.
According to Khachatryan, a discussion took place on this issue recently. "Many were in favor of the fact that if the government increases the debt in" qualitative "areas, which can later lead to" qualitative "economic growth, the increase in debt will not be dangerous for us," he said. At the same time, as the minister pointed out, this "unsafe" threshold for government debt can be recognized in the region of 60% of GDP or more, instead of the current level of 53%.
At the same time, according to the minister, in order for foreign borrowings to be justified, they will have to be directed exclusively to infrastructure programs - road construction, construction of reservoirs and irrigation systems, and also to the power industry. "That is, where investments in the future will ensure economic growth," he explained.
To recall, in an exclusive interview with ArmInfo, former Minister of Finance of Armenia Vardan Aramyan noted that the restrictions imposed in 2018 related to the legislative regulation of the ratio of public debt to GDP were not an end in themselves and the revision of these parameters is fraught with consequences. According to Vardan Aramyan, based on the recommendations of the International Monetary Fund (IMF) in 2017, the Ministry of Finance of Armenia has three thresholds of the state debt level (consisting of government debt and debt of the Central Bank) - 40%, 50% and 60% for the medium and long-term of the period (then Vardan Aramyan headed the RA Ministry of Finance, ed.) were called upon to become guidelines for the entire debt policy of the republic. As the expert explains, the establishment of permissible thresholds for public debt has two main objectives: first, a very high threshold of public debt can lead to crowding out non-interest expenses from developing countries for which "debt is more expensive" and, if you exceed the 60% threshold, directed to interest payments begin to grow faster than income.