Thursday, September 23 2021 15:15
Naira Badalian

In 2025, Armenia will allocate almost $ 1.4 billion for government debt repayment and services

In 2025, Armenia will allocate almost $ 1.4 billion for government debt repayment and services

ArmInfo.According to the data of the RA Ministry of Finance, in 2025, Armenia will have to send almost $ 1.4 billion for the government debt repayment and services  (excluding the debt of the Central Bank of Armenia), formed at  the end of August 2021.

According to the presented data, the state debt of the Republic of  Armenia from $ 7 billion 968.5 million, formed by December 31, 2020,  grew by about $ 990 million and reached $ 8 billion 953 million by  August 31 of this year. Compared to the end of 2020, the figure  increased by 6.09%, and compared to the same period last year - by  about 19.6%. Meanwhile, according to the forecasts laid down in the  basis of the state budget for the current year, as of December 31,  2021, the government debt was planned at around 4.522 billion drams  or $ 8.551 billion - 66% of GDP.

In January-August 2021, the government debt increased from $ 7  billion 508.5 million (by the end of 2020) to $ 8 billion 485 million  - by about $ 976 million, or 6.71%. External debt (debt obligations  of Armenia to international organizations and foreign states, funds  received from the emission of Eurobonds) from $ 5 billion 599.5  million to $ 6 billion 185.1 million - for $ 586 million. In  particular, on January 26 this year, Armenia placed among  international investors the 4th issue of 10-year debt securities in  the amount of $ 750 million. 

The established annual yield on bonds of the 4th issue turned out to  be lower than the yield on the 3rd issue - 3.875% versus 4.625%.   During the reporting period, domestic debt increased from $ 1 billion  909.0 million by about $ 391 million to $ 2 billion 299.8 million.   The Central Bank's debt amounted to $ 468 million (from $ 495.5  million by the end of last year, it decreased by 3.95%).

At present, in the structure of government debt, 75.6% are debt  obligations in foreign currency.

Meanwhile, over its almost 28-year history (since Armenia gained  independence), the Republic of Armenia has attracted borrowings in  the amount of about $ 6.8 billion, and over the past three years  "managed" to increase the national debt by almost $ 2 billion 100  million. At the end of December 2017, the total public debt of  Armenia reached $ 6.774 billion, and by the time the new government  was formed, at the end of April 2018, this figure was $ 6,867  billion. By the end of 2018, the public debt increased to $ 6,922  billion, in 2019 - to $ 7 321 billion. By the end of 2020, the  national debt increased by $ 647 million. - up to $ 7.968 billion, of  which $ 7.509 billion is government debt (external debt - $ 5.593  billion, and domestic debt - $ 1.915 billion).

As a result, if the ratio of government debt to GDP by the end of  2019 was 49.9%, then by the end of 2020 the level of government debt  to GDP reached 63.5%. Thus, Armenia has "gone" beyond the limits  established by the republic's fiscal rules, which allow the indicator  to grow up to 60% of GDP. Currently, the ratio of government debt to  GDP is 62.3%.

The national debt is stable and manageable! Ministry of Finance of  Armenia assures!

As head of the Macroeconomic Policy Department of the RA Ministry of  Finance Eduard Hakobyan stated on the air of Public Television, the  annual comprehensive diagnostics of debt risks shows that, despite  the increase in the debt burden that occurred during the crisis  period (pandemic, war in Artsakh, Ed. note), the reaction of the  financial authorities was adequate to the existing conditions. "As  estimates show, debt is still in the area of manageability and  stability," he said.

Representative of the legislative branch, the head of the Standing  Committee on Financial, Credit and Budgetary Issues of the National  Assembly Gevorg Papoyan, in turn, said on the air of Public  Television that in the conditions of war and a pandemic Armenia could  follow the path of massive cost cuts, or pursue a stimulating fiscal  policy, then there is - to carry out the main expenses, filling the  gap with credit resources. The government, according to him, chose  the second path, since the first led to a greater economic recession  (at the end of 2020, Armenia recorded a decline in GDP of 7.4%, Ed.   note). More important is how effectively and in what directions the  borrowings were spent, Papoyan said, pointing out that large sums  were invested in fixed assets, which in the long term promises the  country economic growth and, consequently, the ability to painlessly  service the state debt.

At the same time, according to the representative of the Ministry of  Finance, the framework established by the RA law is very flexible -  in crisis conditions it allows one to deviate in a certain way, and  after making a number of adjustments to the current policy, to return  to a given channel. In particular, over the next 5 years, the  Ministry of Finance plans not only to return to the permissible  limits, but also to reach the mark of 54% of GDP.

The beauty of a debt is its payment 

As ArmInfo previously reported, referring to the Strategic Program  for Government Debt Management for 2022-2024, it is until the moment  of payments on the state debt in 2025 that Armenia plans to carry out  the next and fifth tranche of Eurobonds in the international market  in 2024. The funds received from the emission of Eurobonds will be  used to buy back bonds of 2025 maturity.  Meanwhile, as evidenced by  the data of the RA Ministry of Finance on the schedule of repayment  and servicing of government debt until 2053, the state budget of  Armenia is to be "tested for strength" both in 2025 and in 2029 and  2031. Then the financial system of the republic will have to "lay  out" about $ 1.3 billion.

Lenders have a good memory:

In January-August of this year alone, 104.2 billion drams were allocated  to pay interest rates on the government debt.

The largest creditor of Armenia at present is the World Bank - the  share of the International Bank for Reconstruction and Development  and the International Development Association accounts for 38.7% of  the state debt of the Republic of Armenia. The second major creditor  is the Asian Development Bank - 16.9%, the third position is held by  the International Monetary Fund - 7.5%, followed by the Eurasian  Development Bank with 7.1% and the European Investment Bank - 2.9%.

Among the large creditor countries of Armenia, the Russian Federation  is in first place - 7.1% of the public debt, Germany - 6.1%, France -  3.2%, Japan - 4.6%, China - 0.5%, the United States - 0 .3%,  Development Bank of Abu Dhabi - 0.1%.


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