The Armenian authorities appear to remain confident about their ability to manage the country’s external debt that has more than doubled since the onset of the global financial crisis.
Deputy Finance Minister Vartan Aramian insisted on Friday that the existing level of the debt is manageable despite being an equivalent to around 40 percent of Gross Domestic Product.
That ratio is expected to expected to peak at 44 percent in 2012. It stood at less than 15 percent only two years ago, just before Armenia was hit hard by the global recession.
The Armenian government and Central Bank scrambled to cushion the impact of the crisis with large-scale emergency loans from multilateral institutions like the International Monetary Fund and the World Bank as well as Russia. The anti-crisis funding enabled the government to avoid major spending cuts in 2009 when the Armenian economy contracted by over 14 percent.
The country’s external debt soared dramatically as a result. According to the Ministry of Finance, it stood $3.23 billion as of last November, up from $1.5 billion registered in 2008.
The sharp rise has raised concerns about the authorities’ ability to service the debt.
Hrant Bagratian, a former prime minister and a bitter government critic, on Friday put its total amount at $4.2 billion drams and said the authorities will have to spend $500 million and $700 million on debt servicing in 2013 and 2014 respectively.
“We will face a debt default in 2013 and 2014,” Bagratian claimed at a news conference. He said the authorities will be forced to either sharply cut spending or attract fresh loans.
Aramian dismissed Bagratian’s figures as grossly exaggerated, however. He said Armenia’s annual debt repayments falling due in 2013 and 2014 will total only $377 million and $249 million respectively.
“Our activities show that we are quite prudent in terms of borrowing and debt servicing,” Aramian told RFE/RL’s Armenian service. “As for 2013 and 2014, our analysis shows that Armenia is far from facing such [default] risks.”
“I believe that Armenia will definitely manage to cope with the debt easily. Bear in mind that we expect continued economic growth in the coming years,” said the vice-minister.
In a December 2010 report, the IMF put Armenia at “at low level of debt distress.” “The projected debt-to-GDP levels do not appear excessive, and standard stress tests show that Armenia’s public external debt remains sustainable,” IMF said.