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By Atom Markarian
Armenia’s external debt is on course to rise by almost 10 percent to $1.22 billion this year, but its overall burden on the country should decrease due to continued economic growth, official figures show.

According to government projections, the external debt currently worth $1.1 billion will equal 21 percent of the anticipated Gross Domestic Product at the end of 2006. Armenia’s debt-to-GDP ratio stood at 24 percent as of last December -- a significant improvement over the late 1990s when it approached the 50 percent threshold for heavily-indebted nations.

The bulk of the Armenian debt has been incurred by low-interest World Bank loans repayable in 30 years. A large part of that money has been used for covering Armenia’s budget deficit. But the budgetary loans decreased in both absolute and relatives in recent years as robust economic growth allowed the government in Yerevan to increase tax revenues. The government may also become less reliant on the World Bank’s infrastructure loans after beginning to receive $235 million in additional U.S. economic assistance under the Millennium Challenge Account program.

Armenia’s budget for this year sets aside $61 million for debt servicing which has been made easier by the Armenian dram’s dramatic appreciation against the U.S. over the past two years. About $33 million of that is to be paid to by the International Monetary Fund.

Armenia’s debt situation compares favorably with that of neighboring Georgia which owes more than $2 billion to foreign creditors. The latter agreed in 2004 to reschedule repayment of a considerable part of the sum.

The region’s least indebted country is oil-rich Azerbaijan whose external liabilities currently total $1.6 billion or just 12.5 percent of GDP. Azerbaijan’s rising oil revenues make the debt even less of a burden.
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