Armenia`s external debt growing since July 2024

ArmInfo. Armenia's public debt growth rate has decreased from 13.8% to 8% annually, surpassing $12.3  billion (4.8 trillion drams) by August. This was due to a shift in  the trend of external debt growth from 4.1% to a 6% decline and a  slowdown in the increase of domestic debt from 31.2% to 24.5%.

By august, the total value of domestic debt reached $6.3 billion and  $6.1 billion, (2.432 trillion drams and 2.359 trillion drams  respectively). This is evidenced by the preliminary data from the  Ministry of Finance of the Republic of Armenia, as reported by the  Statistical Committee.  In the first 7 months of 2024, public debt  growth also slowed down to 4.2% (down from 6.7% in the same period of  2023), which was accompanied by a slight increase in the growth of  external debt from 3.4% to 4% with a more significant acceleration in  double-digit growth rates of domestic debt from 11.8% to 14%.  This  year, external debt, initially declined after in the first half of  the year, but began to grow since July. 

The pace of growth was significantly slower than the domestic debt,  which continued to accelerate - 0.1% against 3% (per month), as a  result of which their absolute values are now nearly equal.  As of  August 1, 2024, the coverage ratio of external debt by gold and  foreign exchange reserves decreased to 54.5% from 61.9% a year  earlier, against the backdrop of an annual decline and reserves by  17.3% and external debt by 6%. In comparison, the previous year saw  growth in both external debt- 4.1% and reserves -16.3%. Reserves   reached a historically high level of $ 4.220 billion by August. The  structure of external debt, the share of the Government and the share  of the Central Bank did not change over the year, remaining at 91.8%  and 8.2% as of August 1, 2024, amounting to $ 5.7 billion and $ 512.7  million in absolute terms, respectively. 

Moreover, unlike last year, there has been a decrease in the external  debt of both the Government and the Central Bank. In both cases,  there is now a downward trend. In particular, both the government and  central bank external debt reversed their annual dynamics towards an  almost identical decline of 6.6% and 6.3% (from growth of 4.5% and  0.04% a year earlier). In the first 7 months of 2024 alone, there was  also a decline in the external debt of both the Government and the  Central Bank - by 3.4% and 7%, respectively, while in the same period  of 2023, the growth of the Government's external debt by 3.8% was  accompanied by a decline in the Central bank's by 0.7%.  In the  structure of the domestic public debt, government bonds dominate. By  August 2024,  their share had increased to 90.6% from 87.4% of the  previous year ($5.5 billion or 2.1 trillion drams), with an  acceleration of the annual growth of the absolute value from 25.7% to  34.2%. On the other hand, the share of Armenian Eurobonds in the  domestic debt decreased from 12.2% to 9.2% year-on-year, amounting to  $555.8 million or 215.9 billion drams, with a reversal of the annual  dynamics of the absolute value from 91% growth towards a 2.7%  decline. The remaining 0.2% (versus 0.4% a year earlier) fell to the  share of internal guarantees - $17.7 million or 6.9 billion drams,  with a slowdown in the annual growth of the absolute value from 33.3%  to 1.7%. During the first 7 months of 2024, the volume of government  bonds in the  domestic public debt structure increased by 14.4%,  Armenian Eurobonds - by 7.6%, and domestic guarantees decreased by  0.01%. 

In comparison, we note that a year ago, similar seven-month trends  were observed: government bonds and Eurobonds grew by 11.1% and  19.3%, while domestic guarantees were in a more impressive decline of  25.4%. It should be noted that the ratio of public debt to GDP for  2023 increased from 49.2% to 50.5%, with a slowdown in the growth of  both public debt from 15.3% to 11.4% and GDP - from 12.6% to 8.7%.   At the same time, the ratio of external debt to GDP decreased in 2023  from 29.8% to 27.7%, with the dynamics of external debt moving from a  3% decline to a meager 1% growth.  In Armenia, the specific debt  burden per capita increased from $3.6 thousand to $4 thousand in  2023.  Moreover, the per capita debt burden from external debt  remained at $2.2 thousand, while the burden from internal debt  continued to rise, increasing from $1.4 thousand to $1.8 thousand.  And this was observed against the background of an increase in the  population of Armenia over the year by 2% or by 53.4 thousand people  - to 2.991 million people. by January 1, 2024, with the public debt  growing by 11.4% or $1.2 billion.

In 2023, the coverage of external debt by gold and foreign exchange  reserves decreased from 63.8% to 55.4%, against the backdrop of an  increase in external debt of only 1% with a decline in reserves of  12.4%, and this despite the fact that the reserves in August 2023  reached a historical maximum, from which they then began to retreat  more and more every month. For comparison, we note that in 2022, the  external debt was in decline by 3%, and the reserves demonstrated  double-digit growth of 27.3%.  As of January 1, 2024, the public debt  of Armenia exceeded $11.8 billion, of which $6.5 billion is external  debt, and $5.3 billion is domestic debt. Additionally, a special note  in the statistical report highlights that the domestic debt includes  the issueance of AMGB1129A332 benchmark long-term government bonds,  of which 206.358 billion drams, by the Government's decision of  December 28, 2023, were sent to financial organizations as a  concession for financial claims (property rights) that arose as a  result of the tragic September events in Artsakh, when the entire  population was forced to leave their homeland.