WHILE DEBT LEVELS OF ARMENIA ARE MANAGEABLE UNDER THE CURRENT POLICY SCENARIO, THE OUTLOOK IS SUBJECT TO RISKS
ArmInfo
2010-04-23 11:25:00
ArmInfo. While debt levels of Armenia are manageable under the
current policy scenario, the outlook is subject to risks, says
the International Monetary Fund’s Third Review under the Stand-By
Arrangement. Since the onset of the global crisis, Armenia’s debt
dynamics-driven by external debt, which accounts for 95 percent
of public debt-have evolved, and its rapid accumulation calls for
initiating fiscal consolidation over the medium term.
The external debt stock, which was only 13 percent of GDP at end-2008,
had almost tripled by end-2009, reaching 34 percent of GDP and is
expected to peak at about 45 percent of GDP in 2011, before gradually
declining over the medium term. The projected debt-to-GDP levels do
not appear excessive, and standard stress tests show that Armenia’s
debt remains sustainable. However, rollover risk is high, mainly due
to the short maturity of Fund financing with repurchase obligations
during 2012-14.
The standard bound tests show that the combined shocks lead to an
increase in the debt-to-GDP ratio by several percentage points,
to almost 50 percent of GDP. However, the effect of a real exchange
rate shock is particularly pronounced, reflecting the rising weight
of external debt in total public debt.
To recall, as of the end of December 2009 the gross external debt of
Armenia amounted to 5023,8 mln USD, net external debt – 2499 mln USD.