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EXTERNAL DEBT OF ARMENIA MAY REACH $5 BILLION
Vestnik Kavkaza, Russia
Oct 27 2014
26 October 2014 - 1:24pm
By Susanna Petrosyan, Yerevan. Exclusively for Vestnik Kavkaza
An Armenian delegation headed by Prime Minister Ovik Abramyan has
attended the annual meeting with the World Bank and the International
Monetary Fund in the US. Armenia will be granted a loan of $711
million for realization of 13 programs, bringing the external debt
of the country to $5 billion.
According to the National Statistical Service, the external debt
amounted to $4.493 billion in late August 2014. The volume of external
debt worried Minister for Economy Karen Chshmarityan: "The external
debt of Armenia exceeds $4 billion at the moment, it is being paid
off simultaneously. We have already passed the peak of the process of
paying off. The main goal today is to rationalize the debt management.
The government has never taken a bigger debt burden than it can
service, according to the expectations of GDP growth," the minister
said. Government officials are confident that the external debt volume
for the country is not dangerous, as it does not exceed 50% of GDP.
Moreover, servicing the debt will not hinder realization of any
budget program.
During discussions of two credit agreements worth $30 million in
September, the parliamentary opposition spoke out against any rise of
the external debt. Members of the Prosperous Armenia and the Armenian
National Congress factions warned the government against increasing
the debt to $5 billion.
Indeed, the peak of debt payments was in 2013, when the government was
forced to spend over $400 million on debt servicing, three times as
much as in 2012. The problem of servicing the external debt is one
of the most acute in the Armenian economy. Armenia owes about 80%
of its debt to international financial organizations, mainly the IMF
and the World Bank.
ANC member Vaagn Khachatryan, an economic expert, believes that the
problem is in the way Armenia plans to pay the debt, not its size:
"If the GDP were formed by our production, there would have been no
dangers, in other words, you need to produce in order to pay debts."
Vardan Oskanyan, a member of the Prosperous Armenia Party, assumes
that management of the debt is one thing, while use of loans is a
completely different issue: "Loans were not used in economic sectors
that would encourage economic growth on the one hand, and fill the
budget and ease the burden of servicing external debt on the other."
So far, loans have not been spent on launching new industries,
creating jobs or increase of income from production. Income from
production should be taxed to cover the external debt. Instead, the
government keeps taking out new loans, putting extra pressure on the
budget and economic development.
The old Cabinet of Tigran Sargsyan (2008 - March 2014) was declaring
the need for developing industry, creating jobs, expanding production.
No steps for the development of industry and small or medium-sized
business were made then. On the contrary, the economic, financial and
fiscal policies have brought destruction on small and medium-sized
business, consequently increasing unemployment and poverty in the
country. As a result of Sargsyan's policy, monopolies got stronger,
investments in the economy dropped about 3-fold and the external debt
almost doubled. According to official data, the external debt amounted
to $1.7 billion in 1998-2008, it exceeded $4 billion in 2008. The prime
minister was solving the debt problem by finding new foreign loans.
Some experts believe that the economic growth of Armenia will amount
to 2.5% in 2014, almost nothing. The new government of Ovik Abramyan
has become a prisoner of Sargsyan's policy. On the other hand, the
government made no real steps to develop the economy in 1.5 years. The
new government plans to continue the policy of its forerunner: take
loans to solve social problems and maintain the economy. The latter
is basically a living organism that needs development, expansion,
creation of competitive industries, increase of investments, growth
of production and exports. Instead of creating proper conditions for
survival of the organism, the government continues to take loans that
it cannot efficiently use due to the high corruption level.
http://vestnikkavkaza.net/analysis/economy/61457.html
Vestnik Kavkaza, Russia
Oct 27 2014
26 October 2014 - 1:24pm
By Susanna Petrosyan, Yerevan. Exclusively for Vestnik Kavkaza
An Armenian delegation headed by Prime Minister Ovik Abramyan has
attended the annual meeting with the World Bank and the International
Monetary Fund in the US. Armenia will be granted a loan of $711
million for realization of 13 programs, bringing the external debt
of the country to $5 billion.
According to the National Statistical Service, the external debt
amounted to $4.493 billion in late August 2014. The volume of external
debt worried Minister for Economy Karen Chshmarityan: "The external
debt of Armenia exceeds $4 billion at the moment, it is being paid
off simultaneously. We have already passed the peak of the process of
paying off. The main goal today is to rationalize the debt management.
The government has never taken a bigger debt burden than it can
service, according to the expectations of GDP growth," the minister
said. Government officials are confident that the external debt volume
for the country is not dangerous, as it does not exceed 50% of GDP.
Moreover, servicing the debt will not hinder realization of any
budget program.
During discussions of two credit agreements worth $30 million in
September, the parliamentary opposition spoke out against any rise of
the external debt. Members of the Prosperous Armenia and the Armenian
National Congress factions warned the government against increasing
the debt to $5 billion.
Indeed, the peak of debt payments was in 2013, when the government was
forced to spend over $400 million on debt servicing, three times as
much as in 2012. The problem of servicing the external debt is one
of the most acute in the Armenian economy. Armenia owes about 80%
of its debt to international financial organizations, mainly the IMF
and the World Bank.
ANC member Vaagn Khachatryan, an economic expert, believes that the
problem is in the way Armenia plans to pay the debt, not its size:
"If the GDP were formed by our production, there would have been no
dangers, in other words, you need to produce in order to pay debts."
Vardan Oskanyan, a member of the Prosperous Armenia Party, assumes
that management of the debt is one thing, while use of loans is a
completely different issue: "Loans were not used in economic sectors
that would encourage economic growth on the one hand, and fill the
budget and ease the burden of servicing external debt on the other."
So far, loans have not been spent on launching new industries,
creating jobs or increase of income from production. Income from
production should be taxed to cover the external debt. Instead, the
government keeps taking out new loans, putting extra pressure on the
budget and economic development.
The old Cabinet of Tigran Sargsyan (2008 - March 2014) was declaring
the need for developing industry, creating jobs, expanding production.
No steps for the development of industry and small or medium-sized
business were made then. On the contrary, the economic, financial and
fiscal policies have brought destruction on small and medium-sized
business, consequently increasing unemployment and poverty in the
country. As a result of Sargsyan's policy, monopolies got stronger,
investments in the economy dropped about 3-fold and the external debt
almost doubled. According to official data, the external debt amounted
to $1.7 billion in 1998-2008, it exceeded $4 billion in 2008. The prime
minister was solving the debt problem by finding new foreign loans.
Some experts believe that the economic growth of Armenia will amount
to 2.5% in 2014, almost nothing. The new government of Ovik Abramyan
has become a prisoner of Sargsyan's policy. On the other hand, the
government made no real steps to develop the economy in 1.5 years. The
new government plans to continue the policy of its forerunner: take
loans to solve social problems and maintain the economy. The latter
is basically a living organism that needs development, expansion,
creation of competitive industries, increase of investments, growth
of production and exports. Instead of creating proper conditions for
survival of the organism, the government continues to take loans that
it cannot efficiently use due to the high corruption level.
http://vestnikkavkaza.net/analysis/economy/61457.html