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Finance Minister Downplays Armenia’s Rising Debt


Armenia -- Armenian Finance Minister Atom Janjughazian speaks during a cabinet meeting in Yerevan, February 4, 2021.

Finance Minister Atom Janjughazian on Thursday acknowledged that Armenia’s growing public debt is a cause for concern but insisted that the government can bring it to a “more manageable level.”

The debt rose by $647 million, to almost $8 billion, in the course of 2020 amid a steep recession primarily caused by the coronavirus pandemic. According to government projections, it will likely pass the $9 billion mark by the end of this year.

“It would be strange if the body tasked with public debt management was not concerned [about the rising debt,]” Janjughazian told reporters after a weekly cabinet meeting in Yerevan.

In his words, the debt will be equivalent to around 70 percent of Gross Domestic Product if the Armenian economy grows in 2021 at a 3.2 percent rate forecast by the government. Slower economic growth, anticipated by the country’s Central Bank and the International Monetary Fund, would translate into a higher debt-to-GDP ratio.

“As a rule, for developing countries a debt-to-GDP ratio exceeding 70 percent is considered a high or at least medium level of risk when it is not clear … how the authorities plan to bring it back to a more manageable level,” said Janjughazian.

“We must make every effort to return to that level. We must think not about reducing the debt in absolute terms but about achieving faster GDP growth, which is part of our programs,” added the minister.

Tao Zhang, the IMF’s deputy managing director, said in December that the authorities in Yerevan “remain committed to taking measures to safeguard debt sustainability.” The Armenian debt should fall to around 60 percent of GDP “over the medium-term” as a result of those measures, he said in a statement.

The debt rose further last week after Armenia issued its fourth Eurobond worth $750 million. Janjughazian confirmed that the money will be mostly used for covering the government’s 2021 budget deficit projected at 341 billion drams ($658 million), or at least 5.3 percent of GDP.

Speaking at Thursday’s cabinet meeting, Prime Minister Nikol Pashinian touted the fact that the 10-year dollar-denominated bonds were sold at a record-low yield of 3.9 percent because of a strong interest from foreign investors.

“This is certainly a very important signal for our economy. A guarantee of macroeconomic stability has thus been created,” claimed Pashinian.

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