Armenia’s Foreign Debt Hits $876 Million

YEREVAN (RFE/RL)–Armenia’s aggregate foreign debt grew by 13 percent last year to reach a new high of $876 million–slightly less than a half of its gross domestic product–official statistical data reveals. The authorities estimate that the figure will further rise to $938 million by the end of this year

The Armenian government and Central Bank will spend a total of $78 million on external debt servicing–which is roughly one fifth of projected government revenues in the year 2000. This compares with $61.6 million spent last year.

The government of Prime Minister Aram Sargsyan expects $120 million in fresh loans this year–which would mostly go to cover its budget deficit. The World Bank will remain Armenia’s single largest lender–having already promised $85 million in additional funds.

The debt expenditure is included in the government’s draft budget for this year–which was submitted to the parliament last week. The government–which enjoys the support of the parliament majority–hopes the bill will be approved by the end of this month. The draft is based on government expectations of a faster economic growth and continued low inflation.

The bulk of Armenia’s foreign debt is concessional loans with an average interest rate of 2.2 percent and a long repayment period.

The government program to be debated by the National Assembly says Yerevan will negotiate with Western lenders to try to postpone repayment of non-concessional loans that will fall due between 2001 and 2005.

It also describes as "satisfactory" the country’s foreign debt indicators–pointing to the large share of low-interest loans.

The government hopes that a continuing reduction of the budget deficit will weaken its dependence on external borrowing. But analysts are concerned about a highly unfavorable ratio of the debt to Armenia’s annual exports. It is forecast to be more than three to one this year.

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