With early repayment of national debt, new loans will cost more – Department of State Debt Management of RA Ministry of Finance

Arminfo, Armenia
Aug 30 2018


With early repayment of national debt, new loans will cost more -
Department of State Debt Management of RA Ministry of Finance

 Yerevan August 29

Naira Badalian. The world practice knew many examples of early
repayment of external public debt. Another question, as far as it is
justified today for Armenia, is to talk about the full repayment of
the national debt, if the country continues to plan a deficit budget.
ArmInfo correspondent was told in the Department of State Debt
Management of the Ministry of Finance of Armenia.

In particular, according to the head of the department Arshaluys
Margaryan, Armenia already has the experience of early repayment of a
certain part of the loan. Then, on September 19, 2013, the first issue
of Eurobonds was made: Eurobonds were issued for $ 700 million with a
maturity of 7 years until March 30, 2020. They government ahead of
schedule repaid the loan from Russia for a budget of $ 500 million.

At the same time, Head of the Department of Public Debt Management,
Head of the Accounting and Servicing Department of the Ministry of
Finance Artak Marutyan, provided that Armenia has the opportunity to
repay its obligations ahead of schedule, since the bulk of about 150
credit programs that generated a total external debt of $ 7 billion,
does not provide for fines and penalties. And, if there is a desire,
and most importantly the opportunity, then it is necessary to analyze
which of the "expensive" loans is more expedient to repay in the first
place.

Nevertheless, according to experts, with these $ 7 billion, perhaps
the best solution, will be their investment in the country's economy.
"Is it reasonable to repay the" cheap debt "today, and then to recruit
new ones, attracting more" expensive "loans?" - asked Artak Marutyan.
As noted by Arshaluys Margaryan, Armenia, which is planning a deficit
budget, at least in the near future, it is more correct to take the
path of reducing the amount of attracted funds.

As for the talks about the forgiveness of Armenia's external public
debt by international creditors, according to the head of the
Department, they are fraught with a significant reputational risk for
the Republic of Armenia. "Armenia is quite an authoritative country in
the international financial markets, including from the point of view
that it is timely and fully fulfilling its debt obligations." In this
context, the request for forgiveness of debt may negatively affect the
level of Armenia's sovereign rating, "- Arshaluys Margaryan said.

With the coming to power of a new Cabinet, the topic of repaying the
external public debt was the number one topic. Many experts and
"amateurs" began to express an opinion that if you shake up the
oligarchs - tax deviators or corrupt official officials - you can
raise the necessary amount to repay the entire state debt of Armenia.
A number of citizens, encouraged by the kind attitude of the creditor
countries and donors to the velvet revolution, also expressed the hope
that the international financial structures can forgive Armenia a debt
whose size is "not so significant" for them.

Armenia's state debt by the end of 2017 reached $ 6,744.6 million,
recording an annual growth of approximately $ 832 million by July 31
this year public debt rose to $ 6,759 million of which the government
debt was $ 6,128 billion, the Central Bank - $ 577 million. As of the
end of July, 81.1% of government debt in foreign currency. The
creditors of Armenia's national debt are the International Development
Association (IDA), part of the World Bank Group - 27.5% of the
national debt, the International Bank for Reconstruction and
Development - 16.3%, the Asian Development Bank - 16.1%, the Eurasian
Development Bank - 7.7% %, European Investment Bank - 2.9%,
International Monetary Fund - 2.2%, EU - 1.9%, International Fund for
Rural Development - 1.6%. The International Fund for Development of
OPEC - 1.4% and the European Bank for Reconstruction and Development -
0.6%. Among the creditor countries, Russia is leading - 6.8%, Japan -
5.9% and Germany - 4%, France - 3.2%, while China and the US lent to
Armenia at 0.6% and 0.5% respectively.