ArmInfo. By December 31, 2021, Armenia's public debt will amount to 4.509 billion drams (about $ 9.135 billion) or 64.1% of GDP, and by the end of 2022 the figure will reach 5.029 billion drams (about $ 10.188 billion) or 63.9% of GDP.
According to the forecasts laid down in the state budget, by December 31, 2022, the government debt, compared with the same indicator for 2021 (4.274 billion drams or about $ 8.656 billion), will decrease by 0.1 percentage points and will amount to 4.779 billion drams (about $ 9.682 billion) or 60.7% of GDP - the increase will be about $ 1.026 billion (the estimated exchange rate of the Armenian dram to the dollar is 493.6 drams).
In 2021-2022, it is planned to increase the share of government treasury bonds in drams in the structure of government debt, which, according to forecasts, will be 2.9% and 2.6%, respectively. At the end of 2022, the share of domestic debt will increase by 2.4% to 30.7%.
Previous developments:
According to the Ministry of Finance of Armenia, by the end of 2020, the national debt increased by $ 647 million - up to $ 7.968 billion, of which $ 7.509 billion was government debt (external debt - $ 5.593 billion, and domestic debt - $ 1.915 billion). For 8 months of this year the national debt of the Republic of Armenia increased by about $ 990 million and reached $ 8 billion 953 million, and the government debt - up to $ 8 billion 485 million - by about $ 976 million, or 6.71%. 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. 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.
The reasons for such a sharp jump, as stated by the Armenian authorities, are quite objective. So, in 2020, as a result of an increase in military spending and costs of anti-corruption measures, the deficit of the state treasury, compared to 2019, increased by 4.4 percentage points - to 334 billion drams or 5.4% of GDP. "The decline in GDP (-7.4% -ed. note), an increase in the state budget deficit, as well as the devaluation of the dram against the US dollar led to an increase in the debt burden of the Armenian government, which amounted to 63.5% of GDP, having increased by 13.4 percent points from the previous year, exceeding the permissible threshold of 60%. The increase in the ratio of public debt to GDP was largely due to the economic recession and the devaluation of the exchange rate, by 3.9 percentage points each. The share of the primary balance was 2.7 percentage points, positive real interest rates - 1.7 pp ", - says the budget message.
Despite this, the debt of the RA Government continues to be assessed as stable and manageable. At the same time, as the financial authorities admit, the risks associated with the current level of debt burden are quite tangible. "In particular, although debt according to the IMF WB methodology is considered low-risk (but at the same time very close to the average risk threshold), in the event of shocks in the economy and with the exchange rate, the debt / GDP ratio remains above the 60% threshold established by the fiscal rules of the Republic of Armenia. In addition, the debt portfolio of the Government of the Republic of Armenia remains vulnerable due to the high share of foreign currency debt (70.1% by the end of 2022) and debt to non-residents, "the authors of the project noted. What will happen:
The financial authorities assure that in 2022 there will be a return to the logic of the "golden rule" of public finance, established by fiscal rules, which will create a solid foundation for long-term high economic growth, ensure a stable decline in the debt-to-GDP ratio and improve the spending structure. In particular, it is planned to increase the share of capital expenditures in total expenditures, as a result of which the volume of capex (about 350 billion drams) will exceed the size of the state budget deficit (242.2 billion drams). Armenia's fiscal policy for 2021-2026, focused on stimulating economic growth (at least 7%, and in the presence of favorable external conditions - all 9%), by improving tax administration, will also lead to an increase in the ratio of taxes to GDP by 0,9% pp. As a result of fiscal consolidation, the authorities promise to come to an indicator below 60% of GDP by 2026.
Debt good turn deserves another
In 2022, to service and repay government debt, 518.2 billion drams (about $ 1.050 billion) will be required, of which 303.6 billion drams (about $ 615 million) will be debt repayments, and 214.6 billion drams - interest payments (about $ 434.7 million or 2.1% of GDP against 185.5 billion drams this year). It is planned to pay 170.3 billion drams ($ 345.1 million) to repay and service external loans. In 2022, the weighted average interest rate on government debt will be 5%, up from 4.6% in 2021. The cost of servicing government debt (interest payments) will amount to 2.7% of GDP.
By the end of 2022, the World Bank (International Development Association and the International Bank for Reconstruction and Development) will account for 35.3% of the external debt of the Republic of Armenia, the Asian Development Bank - 17.3%, the Eurasian Development Bank - 7.6%, the IMF - 7 , 1%, the share of the European Investment Bank will be 3.7%. Among the countries, the largest creditor to Armenia will be the Russian Federation - 6.9%, Germany - 6.9%, Japan - 3.4%.
According to the government debt repayment schedule until 2054, the peak will be 2025 - more than 600 billion drams will have to be paid, in 2029 - about 550 billion drams, in 2031 - almost 700 billion drams.
