Increasing domestic debt carries the risk of default- economist says

13.03.2017 19:11
Increasing domestic debt carries the risk of default- economist says

YEREVAN, March 13. /ARKA/. Armenia’s growing domestic debt carries a serious risk of default, economist Vilen Khachatryan told journalists today. According to official data, Armenia's aggregate state debt is approaching the $6 billion mark, which is a source of serious concern, as the debt increase is disproportionate with the economic growth.

According to the ministry of finance, the total state debt of the country at the end of February stood at $5.961.2 billion. The economist noted that the increasing domestic debt and payment of interest also carries high risks. In his words, the domestic debt has reached an unprecedented level, exceeding $1 billion, while interest payments grew by 600%.

"Armenia has never paid as much interest on domestic debt. This may mean that international lending organizations no longer wish to provide loans to Armenia, as we have approached the ceiling of the national debt. Therefore, the state has to borrow from the population, which is much more expensive than external loans," he said.

According to the National Statistical Service, payment of interest last year grew by 32.7% to 98.3 billion drams, of which 42 billion drams were paid as interest on domestic debt, an increase of 30.6% from the previous year. In January 2017, payment of interest on domestic debt amounted to 663.7 million drams, an increase of 650% from January 2016.

The economist believes that the inability to service domestic debt is a more serious risk to the economy than the inability to service debts to international organizations.

"When a country can not pay debts to its own population, the government has to resort to the printing press, as a result, there is a threat of hyperinflation and default, "he said.

According to the National Statistical Service, Armenia's domestic debt in 2016 increased by 49.2% from $761.4 million to $1.13 billion, and external debt grew by 11.1% to $4.79 billion. ($ 1 - 485.84 drams). -0-


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