The Armenian government announced on Friday plans to sell more Eurobonds in international debt markets this year in order to finance its budget deficit and reduce fallout from an economic recession in Russia.
“A favorable environment has now emerged in international financial markets for the issuance of hard-currency bonds,” read a government statement issued after a weekly cabinet meeting in Yerevan. It said that proceeds from the upcoming Eurobond sale will be used for not only covering the 2015 budget deficit but also “neutralizing” negative external impacts on the Armenian economy.
Neither the statement nor senior officials who spoke at the session of Prime Minister Hovik Abrahamian’s cabinet specified the volume of what will be the second issuance of Eurobonds in Armenia’s history.
The government sold about $700 million worth of dollar-denominated bonds in September 2013at a relatively high yield of at least 6 percent. It used the bulk of that money for repaying a $500 million Russian loan ten years ahead of schedule.
The Armenian state budget for this year projects a deficit of 120 billion drams ($252 million) that should be equivalent to less than 3 percent of Gross Domestic Product. The government’s 2015 revenue target is based on the assumption that economic growth in the country will accelerate to 4.1 percent.
The International Monetary Fund and the World Bank expect slower growth: 3.3 percent. Some Armenian economists say that even this scenario is overly optimistic given the worsening economic situation in Russia, a key trading partner and the main source of remittances from Armenian migrant workers.
Addressing his cabinet, Abrahamian revealed that he set up recently an ad hoc body tasked with proposing ways of alleviating negative external factors. “You all know that an economic war is underway in the world and our country and economy must be prepared for any scenario,” he said. “We have set up a working group which is headed by [Deputy Prime Minister Vache] Gabrielian and comprises representatives of all relevant ministries.”
“We have discussed numerous measures to enhance the resilience of the economy. In this sense, it is extremely important to ensure inflows of hard currency,” Gabrielian said, for his part. The Eurobond sale is one way of attracting such cash, he added.