Armenia's public debt cut has twofold effect, according to researcher

06.08.2019 12:39
Armenia's public debt cut has twofold effect, according to researcher

YEREVAN, August 6. /ARKA/. “The policy of the new Armenian government is aimed at reducing the country's national debt,' Hrant Mikaelyan, a researcher at the Caucasus Institute in Yerevan, said in comments on a government report that Armenia's external debt has reduced by $120 million over the last 15 months.

In an interview with ARKA news agency Mikaelyan said the first signs of a transition to such a policy by the Ministry of Finance, the Central Bank and other relevant bodies were noticeable since the second half of 2017.

'This is a very conservative budget policy, and given the growth of budget revenues, there is an opportunity for its implementation,” Mikaelyan said.

On the other hand, according to him, if the government collects more money by exploiting a more intensive tax administration, and spends less, it will adversely affect economic growth because of a reduced turnover.

“Therefore, this policy has a twofold effect. For having less public debt, we will be paying by a lower standard of living or by lower rate of economic growth, ”said Mikaelyan.

At the same time, he did not rule out that a drop in growth rates is possible due to a reduction in capital expenditures, although the trend in optimizing the spending is observed in all sectors, including the armed forces.

“We see that domestic investment — gross capital formation — has declined, including from the government. Thanks to this, the government saves money, does not increase public debt, and can even partially cover it, ”said Mikaelyan

Mikaelyan pointed out that the government is using part of the saved money to raise public sector salaries and pensions.

“Most of these changes will take effect from January next year. This means that in the future it will be more difficult to cover public debt, ”he said.

Mikaelyan stressed also the importance of a certain reduction in the state debt now, since next year Armenia will have to allocate large amount to pay its foreign debt.

In essence, as the economist noted, the government now makes a certain reserve so that next year it is easier to take new loans to cover debt payments to the tune of about $800 million. -0-


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