Armenian government announces decrease in external debt as overall public debt continues to grow

Armenian Deputy Prime Minister Tigran Avinyan announced the external public debt of Armenia since the Velvet Revolution has fallen by $120 million (or 2.1 percent).

Though the media has attributed this achievement to the “revolutionary” government of Nikol Pashinyan, it turns out that in parallel with the decrease in the external state debt, internal public debt has increased significantly.

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 What the numbers actually mean

Over the past 15 months, the external public debt of Armenia decreased by 118.5 million dollars and amounted to 5.45 billion dollars.

Moreover, domestic public debt increased by 165.5 million dollars and amounted to 1.478 billion dollars.

Taken together, the total volume of public debt of Armenia has actually increased by $47 million (or 0.7 percent) to 6.934 billion dollars.

Reasons for internal public debt growth  

The growth of internal public debt is explained by several factors.

Armenia takes loans from both residents and non-residents, that is, individuals and legal entities registered inside and outside the country. Over the past 15 months, domestic residents have bought debt issued by Armenia in international securities markets. Thus, a significant amount of external public debt is now classified as internal.

“The volume of securities purchased by residents over the past 15 months has increased by $50 million. That is, these securities were purchased by Armenian banks or individuals”, said Arshaluys Margaryan, head of the Armenian public debt management committee.

The second factor is depreciation of both the Euro and Dollar. Armenia took 50 percent of the state debt in dollars, 13 percent in euros, 30 percent in SDR (special drawing rights).

“All of these currencies for the period under review decreased against the dram,” says Arshaluys Margaryan.

Why public debt will continue to grow

In a separate statement, the Armenian Ministry of Finance recognized the increase in public debt, but emphasized that this increase was indeed intentional. The ministry claims that in response to fluctuating exchange rates it is necessary to balance the government’s share of external and internal public debt.

As of now external public debt still outweighs internal debt by 400 percent.