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Armenia face to face with financial "monster"

6 May 2015 20:46 (UTC+04:00)
Armenia face to face with financial "monster"

By Mushvig Mehdiyev

Armenia's external debt has reached around $4 billion according to the latest data issued by the National Statistics Service, thus ringing the alarm bells.

Statistical data showed that as of late March, the public debt of Yerevan stood at $3.925 billion.

Local newspaper Haykanak Zhamanak claims that the bulk of the overall debt falls on the government.

"Nearly $3.5 billion of the total foreign debt belongs to the government alongside the National Bank's $431 million. Armenia' s gross public debt, including the arrears of various organizations, has been calculated at $8.5 billion or more than 80 percent of the GDP," Zhamanak wrote.

Yerevan's economic policy is characterized by the feeding of a monopolistic economic system - supporting monopolistic importers, and oppressing small and medium-sized businesses.

The country lacks any real competitiveness, resulting in growing prices and the further destitution of the population. Such callous policies have led to much economic instability and monetary fluctuation - the dram has suffered under such economic strains.

And since officials have proven unable and unwilling to address the situation Armenia is slowly disintegrating under the weight of its many crises.

Economist Vilen Khachatryan opposed the increasing of the national debt, supposing that the burden lies on the shoulders of future generations. The fact that emigration is also rising, it means that the debt per capita in Armenia will keep growing.

Experts at the Wall Street Journal have said that Armenia has become one of the most unreliable debtors. Its rating saw a drastic fall in Moody's Investor Service rating in January 2015.

Member of parliament Nikol Pashinyan had earlier likened Armenia to a peasant, while commenting on the increasing foreign debt rate amid the government's enthusiastic appeals for new loans, saying "Armenia resembles a peasant, who gets a loan from one bank to repay its debts with another."

According to the Central Bank official data, Armenia's foreign currency reserves amounted to $1.26 billion in February, a $91 million drop compared with January. The Armenian Times newspaper claimed that the foreign reserves lost $229 million in just two months this year, or over 15 percent, and $853 million throughout 2014, or over 40 percent.

Despite assurances by government that the debt is controllable, last year's data demonstrates a gradual rise in external debt and its approaching the red line. In 2014, the external debt exceeded the benchmark of 50 percent of the GDP and now it surpasses 80 percent. Loans received so far have not had any visible positive effect on the Armenian economy. Now, obviously, a new loan of any sum will only make life for the population that much tougher.

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Follow Mushvig Mehdiyev on Twitter: @Mushviggo

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