The Armenian government on Thursday officially confirmed the sale of its second Eurobond and said it will finance its budget deficit and other spending programs and repay some of its external debt with $487 million raised from foreign investors.
The government issued the 10-year dollar bonds at a record-high yield of 7.5 percent on March 19. The expensive borrowing operation was carried out through leading Western investment banks: Deutsche Bank, HSBC and JP Morgan.
Deputy Finance Minister Pavel Safarian said the government has already spent part of the proceeds on buying back $205 million of its previous dollar bond issue carried out in September 2013. The authorities in Yerevan raised $700 million at a yield of 6.25 percent at the time.
“The rest of the sum, which will be transferred to the Armenian treasury account tomorrow, needs to be injected into our budgetary system,” Safarian told a weekly cabinet meeting chaired by Prime Minister Hovik Abrahamian.
The official specified that $83 million will be used for covering the 2015 budget deficit projected at an equivalent of roughly $250 million. The remaining $200 million or so will be channeled into the government “stabilization fund” for special budgetary expenditures, he said without elaborating.
Safarian would not say whether the government could use the Eurobond proceeds for shoring up the national currency, the dram, or offsetting a possible shortfall in tax revenue resulting from slowing economic growth in Armenia.
In its 2015 budget bill, the government forecast a growth rate of just over 4 percent. The International Monetary Fund and the World Bank consider this projection overly optimistic given Armenia’s economic dependence on recession-hit Russia.