Russia and Armenia signed on Wednesday an agreement on the release of a $500 million Russian loan aimed at helping the Armenian government mitigate the effects of the global recession on the domestic economy.
The agreement was signed by the foreign ministers of the two states after talks held in Moscow. Russia’s Alexei Kudrin told journalists afterwards that the loan will be repayable in 15 years and carry an interest rate of about 4 percent.
His Armenian counterpart, Tigran Davtian, said these terms are beneficial for Yerevan. The deal, reportedly finalized by the two governments in early February, testifies to “the high level of bilateral strategic partnership,” he said.
Davtian did not specify just how Armenia will use the Russian credit equivalent to one fifth of its projected state budget for 2009. The Armenian government has been struggling to meet its budgetary targets and may well revise them downwards later this year. It also needs external assistance to prevent a further sharp depreciation of the national currency, the dram.
The World Bank and the International Monetary pledged earlier this year to allocate a total of over $1 billion in anti-crisis loans to Armenia in the coming years. Some of these loans worth roughly $320 million have already been disbursed.
In a February statement, Armenia’s Finance Ministry said that the loan deal with Russia will not place any “non-financial obligations” on the Armenian side. It was an apparent assurance that the government will not repay the loan with more industrial assets.
Armenia had handed over its largest thermal-power plant and four other enterprises to state-run Russian companies in payment for a $100 million debt to Moscow in 2003.