Despite a significant increase in Armenia’s foreign debt, the authorities in Yerevan will not struggle to repay it in the years ahead, Finance Minister Vartan Aramian insisted on Monday.
“We have not even passed the threshold for moderately indebted countries yet,” he told lawmakers during a parliamentary discussion on the Armenian government’s execution of the 2016 state budget.
Armenia’s public debt is on course to pass the $6 billion mark later this year. The figure is equivalent to more than 55 percent of the country’s Gross Domestic Product.
The debt stood at less than $2 billion before the 2008-2009 global financial crisis plunged the country into a severe recession. The authorities have since borrowed heavily from the World Bank, the International Monetary Fund and other external sources to prevent massive spending cuts and finance infrastructure projects.
Aramian made clear that the government will continue to resort to external borrowing in order to finance its budget deficit, which widened to 278 billion drams ($580) in 2016. The government plans to cut it to 150 billion drams this year.
David Lipton, the IMF’s first deputy managing director, said in December that the Armenian authorities intend to “ensure that debt remains below 60 percent of GDP over the medium term.”
Some parliamentarians expressed concern at the authorities’ ability to meet the mounting debt service commitments, which are projected to reach $1 billion in 2020. The country’s entire state budget is currently worth around $3 billion.
In Aramian’s words, Eurobonds issued by the government in 2013 will account for half of the 2020 repayment.The minister revealed that the government plans to buy back that $500 million debt through another Eurobond issue. He said his ministry is already “working very actively” with Western investment banks like JP Morgan and HSBC for that purpose.
Prime Minister Karen Karapetian’s cabinet expects that economic growth in Armenia will accelerate to more than 3 percent this year. In its five-year policy program approved by the National Assembly last week, the government pledged to help ensure an average annual growth rate of around 5 percent.