It was equivalent to an estimated 63.4 percent of Gross Domestic Product, up from 59 percent in 2017 and just 18 percent in 2007.
The debt-to-GDP ratio began rising significantly two years ago amid a recession caused by the coronavirus pandemic and compounded by the war in Nagorno-Karabakh. The Armenian economy shrunk by 7.6 percent in 2020, forcing the government to resort to additional external borrowing to make up for a major shortfall in its tax revenue.
The government and the Central Bank borrowed even more (about $1.26 billion) from mostly external sources last year, despite renewed economic growth and a major rise in tax revenue. The new loans included Armenia’s fourth Eurobond, worth $750 million, issued in January 2021.
Arshaluys Margarian, head of the Armenian Finance Ministry’s debt management division, downplayed the rising debt, saying that it reflects a global trend and does not put financial stability at risk.
“Our economy will remain deficit-driven for a long time,” Margarian told RFE/RL’s Armenian Service. “How can the debt fall if the economy is to keep growing in physical terms?”
“The most important thing is the pace of economic growth,” he said. “If the economy grows faster than the debt, then let [the debt] grow, for God’s sake. That will only benefit the country.”
Finance Minister Tigran Khachatrian expressed confidence in September that the ongoing economic recovery will allow the government to cut the public debt to 60.2 percent of GDP by the end of 2022. The International Monetary Fund forecast afterwards, however, that this is unlikely to happen before 2024.
This and other fiscal targets set by the government are now called into question by fallout from Russia’s ongoing invasion of Ukraine. Prime Minister Nikol Pashinian warned on Friday that severe economic sanctions imposed on Moscow by the West could also hit Armenia and other ex-Soviet states dependent on trade with Russia.