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Where Is Russian Loan of 500 Million?
The decision of the government to issue government bonds may be a
breakthrough. It may be. However, the issue brings up issues which
make breakthrough relative.
Prime Minister Tigran Sargsyan said the money from bonds will be used
to repay the debt to Russia. He noted that soft conditions of
repayment have been agreed with the Russian counterparts.
Perhaps, Russians demand that Armenia repay the anti-crisis loan of
500 million dollars. The question occurs whether the Armenian
government would issue bonds if Russia had not remanded repayment.
Bonds are a subtle issue. Those are indicators of a country's
reputation, credibility. The interest is important though. What will
be interest on the government bonds of Armenia? In fact, Armenia is a
new actor, which means that interest must be high to attract
customers. In addition, Armenia is a state with an unresolved
conflict, complicated relations with two of its four neighbors, at a
cold war, in blockade and isolation.
Most people would prefer to buy bonds of more stable countries at
lower interest than the ones at high interest issued by Armenia.
Hence, demand for Armenian bonds is under doubt and if Tigran Sargsyan
is talking about repayment of the Russian loan, there must have been a
preliminary agreement on issue and there is a buyer already otherwise
Armenia would not issue bonds.
So, who will be the buyer, the West or Russia? The minister of finance
Davit Sargsyan has stated that Armenia is not considered a low-income
country and is no longer eligible for soft loans. In fact, government
bonds replace soft loans, so they are similar to a soft loan. Who will
borrow money to Armenia?
Why does the West stop issuing soft loans to Armenia? Is the reason
that Armenia is not a low-income country or does the West think that
Armenia should not rely on loans but improve its business climate and
attract investments to be able to resolve its social issues?
Apparently, this is the scenario. Loans are wasted, whereas a
capitalist would not allow waste of his money.
Hence, issue of government bonds brings up questions. In fact, Armenia
is not giving up the tactics of addressing needs by borrowed money.
Bonds are issued to repay the Russian loan, whereas the question
occurs where that 500 million went to and why the enterprises which
received it do not repay it. the economy of Armenia is officially
growing, the crisis has been overcome, the country has stepped into
the stage of development. So why isn't the loan repaid by those who
received it? If they have not received it, where is the loan which the
government is going to repay by issuing state bonds?
Will Russia buy the bonds, Armenia repay the loan to Russia on money
from bonds, eventually owing Russia the money of bonds?
Or does the government of Armenia want to repay the loan to Russia and
then launch economic reforms by the time of paying interest on
government bonds?
However, real reforms are required to attract Western investments. In
other words, Armenia needs to use the time out of bonds with common
sense. It means complete review of the economic and political
relations, demolition of corruption schemes. It is necessary to
account for the 500 million dollar Russian loan, where is the profit
from loan, why is there a need to borrow more to repay it?
Or an independent commission must be set up involving stakeholders,
the civil society and political opposition, to study the effectiveness
of management in ARG to understand whether the gas bills are common
sense or are consumers paying for gas, not mismanagement of ARG.
Armenia needs to answer a number of questions one by one to ensure
that the government bonds will have value apart from price which will
reduce interest and boost demand.
Hakob Badalyan
19:30 17/05/2013
Story from Lragir.am News:
http://www.lragir.am/index/eng/0/comments/view/29908
The decision of the government to issue government bonds may be a
breakthrough. It may be. However, the issue brings up issues which
make breakthrough relative.
Prime Minister Tigran Sargsyan said the money from bonds will be used
to repay the debt to Russia. He noted that soft conditions of
repayment have been agreed with the Russian counterparts.
Perhaps, Russians demand that Armenia repay the anti-crisis loan of
500 million dollars. The question occurs whether the Armenian
government would issue bonds if Russia had not remanded repayment.
Bonds are a subtle issue. Those are indicators of a country's
reputation, credibility. The interest is important though. What will
be interest on the government bonds of Armenia? In fact, Armenia is a
new actor, which means that interest must be high to attract
customers. In addition, Armenia is a state with an unresolved
conflict, complicated relations with two of its four neighbors, at a
cold war, in blockade and isolation.
Most people would prefer to buy bonds of more stable countries at
lower interest than the ones at high interest issued by Armenia.
Hence, demand for Armenian bonds is under doubt and if Tigran Sargsyan
is talking about repayment of the Russian loan, there must have been a
preliminary agreement on issue and there is a buyer already otherwise
Armenia would not issue bonds.
So, who will be the buyer, the West or Russia? The minister of finance
Davit Sargsyan has stated that Armenia is not considered a low-income
country and is no longer eligible for soft loans. In fact, government
bonds replace soft loans, so they are similar to a soft loan. Who will
borrow money to Armenia?
Why does the West stop issuing soft loans to Armenia? Is the reason
that Armenia is not a low-income country or does the West think that
Armenia should not rely on loans but improve its business climate and
attract investments to be able to resolve its social issues?
Apparently, this is the scenario. Loans are wasted, whereas a
capitalist would not allow waste of his money.
Hence, issue of government bonds brings up questions. In fact, Armenia
is not giving up the tactics of addressing needs by borrowed money.
Bonds are issued to repay the Russian loan, whereas the question
occurs where that 500 million went to and why the enterprises which
received it do not repay it. the economy of Armenia is officially
growing, the crisis has been overcome, the country has stepped into
the stage of development. So why isn't the loan repaid by those who
received it? If they have not received it, where is the loan which the
government is going to repay by issuing state bonds?
Will Russia buy the bonds, Armenia repay the loan to Russia on money
from bonds, eventually owing Russia the money of bonds?
Or does the government of Armenia want to repay the loan to Russia and
then launch economic reforms by the time of paying interest on
government bonds?
However, real reforms are required to attract Western investments. In
other words, Armenia needs to use the time out of bonds with common
sense. It means complete review of the economic and political
relations, demolition of corruption schemes. It is necessary to
account for the 500 million dollar Russian loan, where is the profit
from loan, why is there a need to borrow more to repay it?
Or an independent commission must be set up involving stakeholders,
the civil society and political opposition, to study the effectiveness
of management in ARG to understand whether the gas bills are common
sense or are consumers paying for gas, not mismanagement of ARG.
Armenia needs to answer a number of questions one by one to ensure
that the government bonds will have value apart from price which will
reduce interest and boost demand.
Hakob Badalyan
19:30 17/05/2013
Story from Lragir.am News:
http://www.lragir.am/index/eng/0/comments/view/29908