The newly appointed Finance Minister Vartan Aramian has urged the government to prevent a further rapid increase in Armenia’s sovereign debt through greater fiscal austerity.
Speaking at a cabinet meeting in Yerevan on Thursday, Aramian said that the mainly foreign debt reached $5.5 billion in August, up from $4.4 in late 2014. It will rise further by the end of this year to a level equivalent to 54.4 percent of Gross Domestic Product, he said.
“For two consecutive years, in 2014 and 2015, we had a fairly high budget deficit of 4.8 percent, and this year we will have a deficit equivalent to an estimated 5.9 percent of GDP. This is the main source of debt generation,” he told Prime Minister Karen Karapetian and fellow cabinet members.
“We should therefore be [fiscally] more conservative in the coming years to prevent further growth of the debt,” he said.
The minister issued the warning while presenting a budget proposal envisaging spending cuts that would bring the deficit down to 3 percent of GDP in 2017. The draft budget, which Karapetian described as “tough,” was formally approved by the cabinet. The premier said government spending will decrease by 100 billion drams ($210 million) next year.
The public debt stood at less than $2 billion before the 2008-2009 global financial crisis plunged Armenia into a severe recession. The government has since borrowed heavily from the World Bank, the International Monetary Fund and other external sources in a bid to prevent massive spending cuts, diversify the domestic economy and finance infrastructure projects. Economic growth in Armenia has been sluggish in the last few years.
Despite his concerns, Aramian did not back opposition claims that the loans secured since 2009 have not been mainly wasted by the authorities. “I don’t agree with the notion that we have not achieved our goals because we are in debt,” he told reporters.