Monday, October 25 2021 16:11
Naira Badalian

Ministry of Finance: Armenia will return to permissible limits of  government debt allowed by law by 2026

Ministry of Finance: Armenia will return to permissible limits of  government debt allowed by law by 2026

ArmInfo. In 2022, Armenia's public debt will increase by 482 billion drams and reach 4 trillion 991 billion drams (63.4% of GDP), from 4 trillion 509 billion drams  or 64.1% of GDP expected by the end of 2021. Armenia's Minister of  Finance Tigran Khachatryan stated this in the parliament on October  25, presenting the draft budget for next year.

So, according to the forecasts laid down in the basis of the state  budget, by December 31, 2022, the government debt will decrease by  0.6 percentage points and amount to 4.740 billion drams and 60.2% of  GDP (about $ 9.603 billion). By the end of this year, the financial  authorities expect the indicator to increase to 4.274 billion drams  (about ($ 8.656 billion) and 60.8% of GDP. Thus, the increase will be  about $ 947 million (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 2.8%, respectively. At the  end of 2022, the share of domestic debt will increase by 2.4% to  30.7%.

At the same time, the deficit of the state treasury is planned to be  reduced by about 99 billion drams or by 29% - to 243 billion drams or  3.1% of GDP. The budget deficit will be financed from both domestic  and foreign loans - 285.2 billion drams and 42.2 billion drams,  respectively.

In 2022, the weighted average interest rate on government debt will  be 5%, up from 4.6% in 2021. The expenses on government debt service  (interest payments) will amount to 2.7% of GDP. In 2022, 517.2  billion drams (about $ 1.048 billion) will be required to service and  repay government debt, of which 302.8 billion drams (about $ 613  million) will be debt repayments, and 214.4 billion drams - interest  payments (about $ 434 million or 2.1% of GDP against 185.5 billion  drams this year).

The head of the Ministry of Finance recalled that the country's  fiscal rules allow the growth of government debt up to 60% of GDP,  and if the rules are violated, they oblige the Armenian government to  submit a draft macro and fiscal measures that will allow the republic  to return to 60% within the next 5 years.  Meanwhile, if the ratio of  government debt to GDP by the end of 2019 was 49.9%, then by the end  of 2020, due to the pandemic and the war in Artsakh, Armenia was  forced "to cross the Rubicon", increasing the indicator to 63.5% of  GDP. Nevertheless, according to the financial authorities of Armenia,  the fiscal policy of Armenia for 2021-2026, focused on stimulating  economic growth (at least in the amount of 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% p.p. And as a result of fiscal consolidation on  government debt, the authorities promise not only to return to  permissible limits by 2026, but also to reach the mark of 54% of GDP.

It should be noted that according to the data of the Ministry of  Finance of the Republic of Armenia, for 9 months of 2021, the state  debt of Armenia increased by $ 1.069 billion, reaching the level of $  9.038.1 billion 973 million. In 2025, for the repayment and servicing  of the government debt (excluding the debt of the Central Bank of  Armenia), formed at the end of September 2021, Armenia will have to  allocate almost $ 1.4 billion. At the same time, over its 28-year  history (since Armenia gained independence), the RA has attracted  borrowings in the amount of about $ 6.8 billion, and over the past  three years "managed" to increase the national debt by $ 2 billion  106 million. In January-September 2021, the government debt increased  from $ 7 billion 508.5 million (by the end of 2020) to $ 8 billion  564.5 million - by about $ 1 billion 056 million or 14.1%.

At present, the largest creditor of Armenia is the World Bank: the  share of the International Bank for Reconstruction and Development  and the International Development Association account for 38.8% of  the state debt of the Republic of Armenia. The second major creditor  is the Asian Development Bank - 16.9%, the third place is held by the  International Monetary Fund - 7.6%, followed by the Eurasian  Development Bank with 7.2%. Among the large creditor countries of  Armenia, the first place is taken by the Russian Federation - 7.2%,  Germany - 6%, France - 3.1%, Japan - 4.5%, China - 0.5%, the USA -  0.3% and ythe share of the Development Bank of Abu Dhabi is 0.1%.


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