By Atom Markarian
Demand in bonds and treasury bills issued by the Armenian government by far exceeds their supply, despite a dramatic decline in their yields in recent years, a senior official said on Thursday.Deputy Finance Minister Atom Janjughazian, who heads the Armenian state treasury, said the government could easily double the amount of cash it borrows domestically, but will continue to primarily rely on the still cheaper external loans. “People are ready to lend us a lot more money than we ask them to, even for a 15-year period,” he told reporters.
Successive Armenian governments have long resorted to internal borrowing to finance a small part of their budgetary deficits. The borrowing used to be hugely expensive, with yields on short-term treasury bills averaging 60 percent in the late 1990s. They have since fallen into single digits due to low inflation and overall macroeconomic stability in the country.
That stability reached another milestone last December when the Armenian government issued its first-ever bonds repayable in 15 years. The Finance Ministry easily auctioned off 1.16 billion drams ($2.57 million) worth of such bonds to local banks and other financial institutions. Yields on them averaged 8.82 percent.
The government’s internal debt currently stands at 53 billion drams ($118 million). The sum pales in comparison with Armenia’s $1.1 billion external debt. The bulk of it results from World Bank loans repayable in 30 or more years and with largely symbolic interest rates set at below 1 percent. According to Janjughazian, that is why the government spends roughly the same amount of money on internal and external debt servicing each year and has no plans to drastically boost its T-bill and bond sales despite the strong demand.