By Abdul Kerimkhanov
The problem of Armenian public debt remains critical in the context of discussions of the country’s draft budget for 2020.
Under the proposed budget, Armenian government intends to increase the country's debt obligations to $7.7 billion, which, according to forecasts, will amount to more than 51 percent of GDP.
It is noteworthy that at the end of 2016, the public debt was estimated at $5.9 billion. It means that according to the results of 2020, Armenia's debt burden will rise by $1.8 billion. Nevertheless, the current government sees neither threats of default nor signs of economic disaster. Moreover, the government and especially Armenian Prime Minister Nikol Pashinyan periodically notice very "positive symptoms" of the development of the Armenian economy.
It seems that the new Armenian government fully justifies its predecessors with its approaches and steps in this area. The current authorities use the shortcomings of the previous administration to justify they failure. Allegedly, the previous government took loans, accumulated debt, used corrupt methods, but now there is no corruption and new authorities consider they can safely get into new loans.
However, it is worth clarifying that the previous "shadow" method of spending budget credit funds has replaced a new scheme of wasting money from the budget in the form of bonuses, salaries, business trips, cars and airplanes. For an average citizen of Armenia, whose debt in terms of per capita public debt is already approximately $2,500, there is not much difference how his debt has grown. Under the previous Armenian authorities, the debt grew due to corruption schemes. Today the debt is growing due to the excessive passion for business trips of officials and deputies. In both cases, it is about the dispersal of budget funds, which are formed due to the country's debt obligations.
One clear example of how the current government justifies the economic policy of the previous authorities in the context of public debt with its actions, is the option of easing the pressure of debts on the country's budget. In September 2019, Pashinyan informed the public that the Armenian government issued Eurobonds at unprecedented low-interest rates. "Armenia pledged to repay $500 million in 2020. Thus, in 2020 we had to pay off this debt and pay this money in cash. But we decided to go this way - to issue new bonds,” Pashinyan made his fans happy with his "original" solution to the problem.
In fact, this is not “know-how” at all, and Pashinyan adopted this method of resolving the debt situation from the previous government. In June 2017, during the discussion of budget execution in 2016, Deputy Pashinyan, referring to the issue of external debt, reminded the then Finance Minister Vardan Aramyan about the conclusion of the Control Chamber, according to which in 2020 only $1 billion will be needed to service this debt, and asked if the Minister shared this assessment of the Chamber.
In response, Aramyan recalled bonds issued by the state in 2013 in the amount of $500 million. “If we manage to achieve five percent economic growth, we can repay these $500 million. But why should we repay them if we can carry out the operation accepted in international practice? We already have an agreement, we are working very actively with leading managers of JP, Morgan and HSBC. We will start this from 2018-2019 and choose a convenient moment when the market is favorable, liquid, then we will enter it and make a reissue," Aramyan explained.
The scheme that Pashinyan describes as its “unprecedented successes” had actually been prepared by the previous Armenian administration.
No doubt that a lot of what the current government ascribes to itself today, is left to it as a legacy from the previous government.
So the question today is – what was the point of overthrowing the previous regime in Armenia if the post-revolutionary team still uses the advice of the ex-Armenian government?
Abdul Kerimkhanov is AzerNews’ staff journalist, follow him on Twitter: @AbdulKerim94
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