ARMAVIR, Armenia (RFE/RL)–The Armenian government moved on Thursday to obtain yet another large-scale foreign loan which it hopes will help the country overcome the ongoing economic crisis.
Chairing a session of his cabinet held in the town of Armavir, Prime Minister Tigran Sarkisian reaffirmed his government’s plans to borrow about $500 million from a special anti-crisis fund set up by Russia and five other former Soviet republics making up the Eurasian Economic Community (Eurasec).
Armenia, which has an observer status in the Russian-led economic grouping, last week applied for membership in the $9 billion fund in a bid to secure the loan. It needs to pay a $1 million membership fee in order to become eligible for Eurasec funding.
The government promptly approved the payment for that purpose. “We have already submitted a loan package specifying the volume of financial resources needed by the Republic of Armenia,” said Sarkisian. The money would be used for financing infrastructure projects in the energy, chemical industry and other sectors, he said without elaboration.
Finance Minister Tigran Davtian told journalists that the governing board of the Eurasec fund will meet in Moscow on Monday to discuss the first loan allocations.
The government has already received more than $1.3 million in loans from Russia, the International Monetary Fund, the World Bank and other multilateral institutions this year to reduce the highly negative impact of the global financial crisis on Armenia’s economy. The heavy borrowing has nearly doubled the country’s external debt to about $3 billion, equivalent to 37 percent of its Gross Domestic Product forecast for this year.
The debt/GDP ratio stood at only 13 percent a year ago. It is expected to reach about 50 percent by the end of next year, raising growing concerns about the Armenian authorities’ ability to cope with the debt.
Aristomene Varoudakis, head of the World Bank office in Yerevan, said the debt burden will be manageable and should ease in the coming years as the Armenian economy emerges from recession. But he cautioned that the recovery will be “timid” because of the country’s heavy dependence on the crisis-hit construction sector.
Citing World Bank projections, Varoudakis said the domestic economy, which is on course to contract by at least 15 percent this year, will expand by 1.5 percent in 2010. He also said the bank will provide $165 million in fresh loans to the Armenian government in the course of the year. The bank has lent it $280 million in 2009.