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Recession Pushes Armenian Public Debt To New Record High


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

Armenia’s public debt has soared by more than $1 billion, to $8.65 billion, since the start of the coronavirus pandemic that plunged its economy into a recession, according to government data.

The debt reached nearly $8 billion, or 63.5 percent of GDP, at the end of last year after the Armenian economy shrunk by 7.6 percent and the government resorted to additional external borrowing to make up for a major shortfall in its tax revenues. At almost 334 billion drams ($660 million), the government’s 2020 budget deficit was more than twice the amount projected by it in late 2019.

In January this year, the government issued Armenia’s fourth Eurobond worth $750 million to manage the increased debt and budget deficit. With more foreign loans expected in the coming months, the country’s debt-to-GDP ratio is projected to reach almost 70 percent by the end of 2021.

“We need to lower this indicator to 60 percent over the next five years,” Finance Minister Atom Janjughazian said during a cabinet meeting last week. “This is the debt ceiling which is considered around the world manageable in terms of risks.”

Janjughazian insisted afterwards that the authorities in Yerevan are committed to meeting this target. He stressed that their objective is to reduce the debt-to-GDP ratio, rather than cut the debt in absolute terms. To that end, the government will strive to stimulate economic growth with infrastructure projects, he said.

The government expects the domestic economy to expand by over 3 percent this year. The Armenian Central Bank and the International Monetary Fund have forecast much slower growth.

“The recovery is likely to be protracted,” a team of IMF officials said after visiting Yerevan earlier this month. “While there is uncertainty about the pace of the recovery, our conservative outlook expects growth of around 1 percent in 2021 and 3.5 percent in 2022.”

In a statement, the IMF team also stressed the importance of easing the country’s debt burden.

Tadevos Avetisian, a Yerevan-based economist, was skeptical about the current government’s ability to bring the debt to below 60 percent of GDP by 2027. “Whether or not we will achieve that also depends on political developments,” he said.

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