ArmInfo.The Government of Armenia is preparing to issue debt securities designed for the Armenian Diaspora abroad - Diaspora bonds. High Commissioner for Diaspora Affairs Zareh Sinanyan announced this in an interview to Public Radio.
According to him, the question of the reasonability of issuing such a financial instrument by Armenia has been regularly raised in the government since 2018, but it is the first time that a practical step in this direction has been taken. We are talking about the legislative regulation of this issue. According to him, these will most likely be ordinary registered bonds, aimed mainly at compatriots from the Diaspora. Their yield will be slightly lower than government bonds, since their price will include the "patriotic factor". Diaspora bonds will be denominated in US dollars. Unlike Eurobonds, they are intended not only for so- called "anchor" investors, but mainly for retail buyers. The par value of one debt security is likely to be $ 100.
According to Sinanyan, the initiative combines economic cooperation between the Motherland and the Diaspora, and is also a way to quickly get money in emergency situations. <It will also give the Diaspora an opportunity to establish ties with Armenia. When creating capital for Armenia, this can be done not on the basis of charity, but on the basis of market principles of motivation. The idea, he said, is not new, there is nothing extraordinary in it, "the Commissioner believes, stressing that the issue is currently at the stage of exploring the possibilities and the government should make the final decision in the spring of 2022.
It should be noted that economist Eduard Panoyan already spoke about this idea in an interview with ArmInfo at the beginning of this year. According to him, the potential of the Diaspora is usually viewed as an opportunity for investment, infrastructure development or humanitarian projects in Armenia. At the same time, the Diaspora itself from time to time needs the support of Armenia. The fact is that rapid changes in the world, as well as new shocks and military situations in different regions, are changing the geography and format of the Diaspora. In some cases, new economic realities or political events pose serious problems for Armenians living abroad. Thus, for example, Armenians living in Turkey find it much more difficult to take such steps. They regularly undergo "stress tests" because of the internal situation in the country and the physical danger that local nationalists pose to them. Financial restrictions on the purchase and transfer of foreign currency are periodically tightened. People who want to move abroad are deprived of the opportunity to take out their property. In all these cases, enabling them to acquire RA securities can play an extremely important role both in providing practical support to our compatriots in the Diaspora and in ensuring investment flows to Armenia (even if some of them eventually move to other countries).
To note, such countries as India, Ethiopia, Kenya, Nepal, Philippines, Israel, Nigeria, El Salvador, Sri Lanka have sufficient experience in issuing diaspora bonds. Recently, this idea has been "hovering" in Ukraine as well. Experts believe that due to the patriotic component, these securities can be placed with a lower yield than commercial instruments. According to the Ukrainian analyst Svetlana Babich, when it is almost impossible to find investors on the world financial markets, the demand for diaspora bonds will increase with their active promotion. Such investors will not rush to get rid of securities as soon as a crisis occurs. On the contrary, as a sign of support for their homeland, their responsibility will only grow. Investors perceive such capital investments more as charity, a tool to support their home country in difficult times. In addition, the risk of a country's inability to pay off debt in hard currency is not as important for migrants as it is for other foreign investors.
Usually, migrant investors have certain obligations in their country, therefore the accumulation of assets in their homeland is also an interesting proposal for them. Success in working with the Diaspora will have a positive impact on the country's sovereign credit ratings. As the experience of Israel and India shows, the issuance of Diaspora bonds will be successful if the investor has the opportunity to choose the most acceptable among a wide range of conditions. Yes, it is appropriate to offer different denominations, terms, terms of interest and principal payments. Particular attention should be paid to active efforts to develop ties with the Diaspora. Often, due to the low awareness of such securities, their issues are not in demand, although they are attractive both for the state and for investors. Let us note as a benchmarking that the 4th issue of 10-year sovereign Eurobonds of Armenia in the amount of $ 750 million was placed with an annual yield of 3.875% versus 4.625% for the third issue.