Tuesday, November 15 2022 16:57
Naira Badalian

The state debt of Armenia has exceeded the psychological threshold of  $10 billion

The state debt of Armenia has exceeded the psychological threshold of  $10 billion

ArmInfo. In January-October 2022, Armenia increased the public debt by 9.1% or $837.5 million - up to $10 billion 063.2 million. At the same time, as a result of the  revaluation of the national currency (in January-October, the dollar  depreciated against the dram by almost 20% - from 480 to about 395  drams per $) the state debt in dram terms decreased by 10.1% or 449.3  billion drams - up to 3 trillion 380.3 billion drams.

At the same time, almost over the 27-year history (since Armenia  gained independence), the Republic of Armenia has attracted loans in  the amount of about $6.8 billion, while over the past four and a half  years, it "managed" to increase the public debt by about $3.2  billion. Thus, at the end of December 2017, the total public debt of  Armenia reached $6.774 billion, and by the time the current  government was formed, at the end of April 2018, this figure was  $6,867 billion. At 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 has grown 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).

In particular, according to the data of the Ministry of Finance of  the Republic of Armenia, over the 10 months of 2022, the government  debt in US currency increased by $630 million, or by 8.6% - from $8  billion 767.9 million (4 trillion 209.8 billion drams - by the end of  2021) - to $9 billion 524.6 million, and in drams again decreased by  442.6 billion drams or 10.5% - to 3 trillion 767.3 billion drams. It  should be reminded that the settlement rate of the Armenian dram to  US dollars in the approved state budget for the current year was set  at the level of 477.45 AMD per dollar.

External debt (Armenia's debt obligations to international  organizations and foreign states, funds received from the issue of  Eurobonds) decreased both in dollar and dram terms: in the first  case, by $599.6 million (9.7%) - to about $5 billion 591.1 million,  in the second - by 761 billion drams or 25.6% - from 2 trillion 972.4  billion drams to 2 trillion 211.4 billion drams.  Domestic debt  increased by $1,207.4 million (by 52.6%) or 1 trillion 356.2 billion  drams - from $2 billion 577.2 million (1 trillion 237.4 billion  drams) to $3 billion 933.5 million (1 trillion 555.8 billion drams,  an increase of 25.7%).  The debt of the Central Bank increased in  dollars by 17.7% or $80.9 million - from $457.7 million or 219.8  billion drams (the decrease in drams was 3.1% or 6.7 billion drams)  to $538.6 million or 213 billion drams.  The amount of loans issued  under government guarantees decreased from $101.4 million or 48.7  billion drams to $88.2 million or 34.9 billion drams.  By the end of  October 2022, the share of domestic debt in government debt increased  from 29.4% at the end of 2021 to 41.3% (25.4% at the end of 2020),  while AMD debt (the currency of attraction) increased from 28.28%  (24.2% at the end of 2020) to 37.7%. Only 16.1% of government debt  was attracted at a fixed interest rate (17.1% - at the end of 2021).

The debts should be repaid 

For 10 months of 2022, the volume of financing the budget deficit   through net borrowing amounted to 158.2 billion drams (591 billion  drams for the whole of 2021, and the annual program for this year is  307.6 billion drams). 174.1 billion drams were attracted from  internal sources (placement of state treasury bonds) with an annual  program of 250.2 billion drams, 15.8 billion drams from external  sources (the annual program is 57.3 billion drams).  186.4 billion  drams were allocated to service the government debt (payment of  interest rates) out of 204 billion drams provided for by the annual  program (181.6 billion drams for 2021).  According to the government  debt repayment schedule until 2054, in 2023, Armenia will have to  allocate almost $1.2 billion to repay and service the government debt  (excluding the debt of the Central Bank of the Republic of Armenia),  formed by the end of October 2022, in 2024 - a little more, in 2025 -  over $1.6 billion, in 2029 the amount will be about $1.4 billion, and  in 2031 - about $1.7 billion.  As of October 31, 2022, the unclaimed  balance of government debt amounted to $4 billion 179.9 million ($4  billion 481.1 million as of December 31, 2021).  

Creditors of Armenia 

The World Bank remains the largest creditor (foreign credits) of the  Armenian government - the share of the International Bank for  Reconstruction and Development and the International Development  Association accounts for 38.3% of the state debt of the Republic of  Armenia. The second largest creditor is the Asian Development Bank -  17.5%, the International Monetary Fund is in the third position -  8.8%, followed by the Eurasian Development Bank with 7.9% and the  European Investment Bank -2.6%. External loans from the EU in the  structure of external debt amounted to 1.5%, International Fund for  Agricultural Development - 1.3%, OPEC Fund for International  Development - 1%, EBRD - 0.5%.

Among the major creditor countries, the Russian Federation ranks  first, which accounts for 7.6% of external loans and borrowings of  the RA government, followed by Germany (KFW) - 5.4%, Japan - 3.4%,  France - 3%, China - 0.4%, and the USA - only 0.3% of the public debt  of the Republic of Armenia, Abu Dhabi Development Fund 0.1% of the  external public debt.

Forecasts of financial authorities

According to the approved law on the state budget for 2022, by the  end of this year, the public debt will amount to 4 trillion 986  billion drams or 63.4% of GDP. The government debt will decrease by  December 31, 2022 in the conditions of ensuring 7% economic growth to  60.2% of GDP - to 4 trillion 741 billion drams, from 4 trillion 275  billion drams or 60.8% of GDP expected by the financial authorities  by the end of 2021. In 2022, Armenia will allocate about 10% of all  state budget expenditures or 2.7% of GDP to service the government  debt.

According to the forecasts underlying the draft state budget for  2023, by the end of this year, the state debt of Armenia will  decrease from 63.4% of GDP (at the end of 2021) to 53.8% of GDP, and  by the end of 2023 the figure will be 52.4% of GDP. At the same time,  domestic public debt will increase - from 17.7% of GDP in 2021 to  19.3% of GDP for this year and 20.6% of GDP for 2023. In absolute  terms, the public debt from the actual 4 trillion 430 billion drams  by the end of 2022 will grow to 4 trillion 463 billion drams, and by  the end of 2023 - up to 4 trillion 881 billion drams. The ratio of  government debt to GDP from the actual 4 trillion 210 billion drams  or 60.3% of GDP ($8 billion 768 million) in 2021 will decrease by 3.2  percentage points in 2022 - up to 4 trillion 205 billion drams ($9  billion 682 million) or 50.7% of GDP, mainly due to the strengthening  of the dram against the US dollar, economic growth and a decrease in  the real interest rate (due to a decrease in the nominal interest  rate and acceleration of inflation). As of December 31, 2023, the  figure in absolute terms will increase to 4 trillion 628 billion  drams ($10 billion 602 million) or 49.7% of GDP.

The estimated rate of the Armenian dram against the dollar in the  draft state budget for 2023 is fixed at the level of 404.74 AMD  (477.45 AMD in the budget for 2022), the euro in the amount of 405.35  AMD (552.17 this year), the British pound - at 467.84 AMD (652.1 this  year), the Russian ruble - at the level of 6.72. (6.74 for 2022). 

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