Armenia’s Government Adds the Debt without Prospects for Economic Growth
20.11.2015
15:00
Armenia’s external debt has mounted by roughly 7 percent since 2011, and now given the country’s Gross Domestic Product has not actually increased, the situation appears risky. If the growth rates remain slow, the Armenian Government is likely to cover the foreign debt service with difficulty, said economist Artak Manukyan.

Armenia’s government approved two loan agreements with a total of 128.5 million dollars. Earlier the Government made a decision to borrow 153 million dollars from the Asian Development Bank and approved one more agreement (USD 300 million) with the Eurasian Development Bank.

This week the International Monetary Fund reported that it will provide Armenia with a loan of 16.3 million dollars. Ultimately, over the past three weeks, the Government has accumulated a debt of 597.8 million dollars.

According to the National Statistical Service, as of September 30, the external debt of Armenia was 4.07 billion dollars, or about 40% of GDP. The abovementioned loans inclusive, that figure is 4.6 billion dollars, or about 46% of GDP. The Government expects the external debt to make up 48.3% of GDP by the end of 2015, and 49.4% of GDP in 2016. This figure in Russia is 17.8 %, Kazakhstan – 14.9%, Kyrgyzstan – 53%, Ukraine – 71.2%, and Georgia – 34.8%.

The Government says that the external debt will become risky from a management perspective if it exceeds 60% of GDP. Armenian Minister of Finance Gagik Khachatryan who also thinks so stated if the government fails to ensure a real economic growth in the future, it will face serious problems.

An invitation was sent to the Finance Ministry, however, the Ministry replied they “are busy discussing the draft budget of 2016.” Prime Minister Hovik Abrahamyan, though, has recently instructed the ministers and deputy ministers not to evade communicating with the media and inform the public of the processes in the economy.

Artak Manukyan believes the attraction of the new loans would not be so much problematic if these funds were used efficiently and rationally and if they eventually enhanced the economic growth.

“However, we are observing the opposite picture now. The loans are mostly spent on resolving the current problems and the economic growth rates have slowed down.”

Next year 130 billion AMD (about USD275 million, almost 10% of the state budget) will be allocated for covering the external debt service.

The efficiency of the use of the loan funds is another concern. Manukyan said the organizations lending to Armenia pursue their own interests and actually shut their eyes to the funds being vaporized. "The major part of the loans is spent on development of infrastructures, the other part – on construction and acquisition of equipment. These sectors are most sensitive to corruption risks,” the expert said.

Arshaluys Mghdesyan, Editor-Coordinator

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