ArmInfo. The level of Armenia's public debt will remain above the pre-epidemic level until 2026. Chief economist of the Eurasian Development Bank (EDB) and Eurasian Fund for Stabilization and Development (EFSD) Evgeny Vinokurov expressed this opinion in discussion with journalists on the sidelines of the second Eurasian Congress in Moscow.
According to him, according to EFSD estimates, Armenia has significantly increased the level of public debt in order to combat the coronavirus pandemic.
"If I'm not mistaken, it has reached 67% of GDP. Our models show that the level of public debt in relation to GDP will decline from year to year until 2026. It will decrease, first of all, due to the growth of the gross product. The debt sustainability of Armenia does not cause serious concerns, but, nevertheless, even in these forecasts, the level of the public debt of Armenia until 2026 will remain above the pre-pandemic level. That is, it will not reach the pre-pandemic level of 56%, "the economic analyst noted. According to Vinokurov, the public debt of the Republic of Armenia will decrease to about 60%.
The economist also drew attention to the fact that last year Armenia took out a loan in the international capital market at 3.8% -3.9% of GDP. "We regard this loan as an extremely successful way out, a very successful way out. Applause to the financial authorities. Plus, Armenia took money from the IMF, and in general, the mix of resources on favorable economic terms from Armenia is acceptable. Nevertheless, the further increase in the national debt is a big question", Vinokurov summed up. It should be noted that according to the data of the Ministry of Finance of Armenia, by the end of 2020, the country's public 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 state debt of the Republic of Armenia increased by about $ 990 million and reached the level of $ 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 loans in the amount of about $ 6.8 billion, and over the past three years it has "managed" to increase the national debt by almost $ 2 billion 100 million.
The reasons for such a sharp increase, as stated by the Armenian authorities, are quite objective. Thus, 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 ", - the budget report reads. 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.
