The government played down Armenia’s rising sovereign debt on Thursday as it sought parliamentary approval of $180 million in fresh loans allocated to it by international lending institutions.
Deputy Finance Minister Armen Hayrapetian insisted that Armenia will not become a heavily indebted country even though its combined debt will soon be equivalent to about 55 percent of Gross Domestic Product.
“At the end of the year, Armenia’s entire debt will stand at approximately $5.9 billion,” Hayrapetian told the National Assembly. He said $4.85 billion of the sum is owed to foreign creditors by the government and the Central Bank of Armenia.
Hayrapetian argued that the government has to continue to resort to foreign borrowing in order to finance its budget deficit and essential capital spending.
Opposition lawmakers rejected this explanation, saying that the government is increasing the country’s debt burden instead of improving tax collection and pursuing more sustainable economic policies.
“We just cannot repay this debt,” claimed Aram Manukian of the Armenian National Congress (HAK).
“Do we know where we are headed?” said Naira Zohrabian, the chairperson of the Prosperous Armenia Party. “Does this government know what it is going to do?”
“Believe me, each of us is concerned about the rising debt,” insisted Hayrapetian. He dismissed opposition claims that the government could eventually default on its debt repayments.
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 to prevent massive spending cuts and finance infrastructure projects.
Economic growth in Armenia has been sluggish in the last few years, translating into shortfalls in tax revenue and bigger budget deficits.
Prime Minister Karen Karapetian’s cabinet is due to cut its expenditures next year in line with the state budget passed by the parliament last month. Finance Minister Vartan Aramian said in September that the spending cuts will not only reduce the budget deficit but also help the government keep the debt under control.
“We should be [fiscally] more conservative in the coming years to prevent further growth of the debt,” said Aramian.
David Lipton, the IMF’s first deputy managing director, said earlier this month that the Armenian authorities intend to “ensure that debt remains below 60 percent of GDP over the medium term.”