The government insisted on Thursday that Armenia will have no trouble servicing its foreign debt which has more than doubled since 2008 and is on course to total about $3.8 billion this year.
“We have a debt that is considerable for our country and needs to be managed efficiently,” said Finance Minister Vache Gabrielian. “But in terms of stability, it is not controversial.”
Gabrielian spoke to journalists after Prime Minister Tigran Sarkisian’s cabinet approved a debt management strategy for 2012-2014 at a weekly session held in the southeastern town of Yeghegnadzor.
The 15-page document drawn up by the Armenian Ministry of Finance says that the country’s overall public debt will reach $4.3 billion by the end of 2011, up from $3.7 billion in late 2010 and equivalent to 41.3 percent of Gross Domestic Product.
It is projected to total more than $5 billion by 2015. But the debt’s ratio to GDP is to fall to roughly 38 percent.
Gabrielian said that this proportion may well change of because of currency exchange rate fluctuations. “Let’s say that our debt-to-GDP ratio is within a 40-50 percent range,” he added.
The country’s external debt stood at $1.5 billion in late 2008, just before the onset of a global recession that hit the Armenian economy hard.
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 borrowing enabled the government to avoid major spending cuts in 2009 when the domestic economy contracted by over 14 percent.
The sharp rise in the debt burden raised concerns about the authorities’ ability to repay it. Hrant Bagratian, a former prime minister and a bitter government critic, claimed in January that they could default on debt repayments in 2013 and 2014.
Finance Ministry officials dismissed those claims. “Armenia is far from facing such risks,” one of Gabrielian’s deputies, Vartan Aramian, told RFE/RL’s Armenian service at the time.
According to the document endorsed by Sarkisian’s cabinet, the government’s overall debt service burden will peak in 2013 at an estimated $225 million.
The government plans to spend about $190 million on external and internal debt servicing this year. This will account for approximately 7 percent of its overall expenditures projected by Armenian’s 2011 state budget.
In a December report, the IMF described the Armenian authorities’ debt repayment capacity as “good.” The fund emphasized in that regard the importance of government plans to cut the budget deficit to 2.5 percent of GDP by the end of 2013.
“The projected debt-to-GDP levels do not appear excessive, and standard stress tests show that Armenia’s public external debt remains sustainable,” said the report.