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GROWTH OF ARMENIAN PUBLIC DEBT ROUGHLY WITHIN TARGETS IN 2011
Venla Sipila
Global Insight
May 2, 2012
According to figures from the Armenian Finance Ministry, the country's
state debt ended last year USD4.129 billion, Interfax reports. At
this level, debt equalled 41.7% of GDP, coming just marginally
above the ratio of 41.3% targeted by the Finance Ministry. Further,
the Deputy Finance Minister and treasury head Atom Dzhandzhugazian
stated that, in particular, external state debt at the end of last
year stood at USD3.568 billion, or 36.1% of GDP, while domestic state
debt was USD560 million, or 5.7% of GDP. He further noted that state
debt stood at USD4.196 billion at the end of March this year, with
foreign obligations accounting for USD3.634 billion of this total,
leaving USD562 million for domestic public debt. He further estimated
that debt service will increase until 2015, before starting to ease.
Armenia has specified a limit of 50-60% of GDP for state debt, while
the upper limit of budget deficit is targeted at 3% of GDP.
Significance:Armenian external debt has increased rapidly in
recent years, as financing needs rose sharply during the extremely
severe recession in 2009. However, Armenia's good relationship with
international creditors has secured it good access to concessionary
lending, and thus, a large share of external borrowing is owed to
multilateral creditors. The soft loan terms should keep debt servicing
costs in relation to foreign currency earnings manageable. On the other
hand, the current unstable external environment poses an important
set of risks to Armenian external finances; any marked weakening in
important workers' remittance inflows would put increasing pressure
on external finances, necessitating rising borrowing (seeArmenia:
19 December 2011:). Then again, as long as reforms and responsible
policies continue, access to concessionary financing should be clear as
well, and thus, no immediate threat to solvency is likely in any case.
Venla Sipila
Global Insight
May 2, 2012
According to figures from the Armenian Finance Ministry, the country's
state debt ended last year USD4.129 billion, Interfax reports. At
this level, debt equalled 41.7% of GDP, coming just marginally
above the ratio of 41.3% targeted by the Finance Ministry. Further,
the Deputy Finance Minister and treasury head Atom Dzhandzhugazian
stated that, in particular, external state debt at the end of last
year stood at USD3.568 billion, or 36.1% of GDP, while domestic state
debt was USD560 million, or 5.7% of GDP. He further noted that state
debt stood at USD4.196 billion at the end of March this year, with
foreign obligations accounting for USD3.634 billion of this total,
leaving USD562 million for domestic public debt. He further estimated
that debt service will increase until 2015, before starting to ease.
Armenia has specified a limit of 50-60% of GDP for state debt, while
the upper limit of budget deficit is targeted at 3% of GDP.
Significance:Armenian external debt has increased rapidly in
recent years, as financing needs rose sharply during the extremely
severe recession in 2009. However, Armenia's good relationship with
international creditors has secured it good access to concessionary
lending, and thus, a large share of external borrowing is owed to
multilateral creditors. The soft loan terms should keep debt servicing
costs in relation to foreign currency earnings manageable. On the other
hand, the current unstable external environment poses an important
set of risks to Armenian external finances; any marked weakening in
important workers' remittance inflows would put increasing pressure
on external finances, necessitating rising borrowing (seeArmenia:
19 December 2011:). Then again, as long as reforms and responsible
policies continue, access to concessionary financing should be clear as
well, and thus, no immediate threat to solvency is likely in any case.