Armenian government may move state debt-GDP ratio ceiling up to create room for new debts

26.08.2016 16:11
Armenian government may move state debt-GDP ratio ceiling up to create room for new debts

YEREVAN, August 26. /ARKA/. The necessity of amending the law on Armenia’s state debt is being discussed now as part of the development of the government budget for 2017, and these changes are essential, Haykakan Zhamanak reports referring to its sources.

According to the newspaper, the current law specifies that if Armenia’s state debt exceeds 50% of GDP, the government ought to cut spending and deficit must not be more than 3% of GDP.
The country’s state debt has already come close to this ceiling and continues growing.

“The government wants to move the ceiling up to open room for accumulating new debts,” the report authors say. “Our debt already exceeds $5 billion, and no improvement prospects are seen in the economy.”

Therefore, the only way for the government to perform the planned spending amid stagnant revenue is to raise the state debt/GDP ratio benchmark.

It is also important that the government has to receive the green light from international financial organizations, particularly the International Monetary Fund, for doing that, and it is difficult to predict what reaction will come from the IMF.

According to the National Statistical Service, Armenia’s combined state debt has grown 3.7% or by $191.8 million since the beginning of this year to $5 270.6 million in late May.

In the government budget for 2016, the ratio of the state debt to GDP is projected at 49.4.

Armenia’s state debt is projected to amount to %5.569 billion in 2016, of which 86.6% is foreign debt.

Fitch Ratings said in its latest forecast that Armenia’s state debt will grow to 52.4% of GDP in 2016 from 48.7% in 2015. --0----

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