YEREVAN, February 4. /ARKA/. The Armenian government will use part of the proceeds raised from sale of  $750 million of USD-denominated Eurobonds to build a "financial cushion," Finance Minister Atom Janjughazyan said during a government meeting on Thursday.

The Eurobonds were placed with a maturity of 10 years and a coupon yield of 3.6%. The minister said it is important that the government was able in 2021 to sell another issue of Eurobonds, despite the challenges that the country saw in 2020. He said the placement yield was 3.875%, and the coupon yield was 3.6%.

In response to comments that the placement has increased Armenia's public debt, the minister said the increase should be looked upon in terms of the changes that have taken place recently, and not in terms of absolute numbers.

He noted that at first glance, growth in absolute terms is perceived as a negative phenomenon, but it should be borne in mind that the behavior of public debt is a consequence of fiscal policy and the budget.

“If there is a budget deficit, it is impossible to think about reducing the absolute indicator of the public debt, since it is compensated for by borrowed funds. The only case when we can talk about reducing the national debt in absolute terms is when the only goal is to bring the deficit level to zero. But we did not have and most likely will not have such a policy, since it does not contribute to the development of the economy,” Janjughazyan said.

Consequently, as the minister noted, as long as there is a budget deficit, an increase in the absolute indicator of the state debt is inevitable. However, according to him, other comparative indicators are also taken into account, such as the ratio of the level of public debt to GDP, which shows the burden of public debt on the economy. But this is also just one integral indicator, since investors take into account many other indicators and risks.

“In general, at least until 2019, Armenia was assessed as a country with a low level of public debt, but this does not mean that it is necessary to be satisfied with this and increase debt and risks,” Janjughazyan said, adding that the government plans also sale of domestic bonds to cover the deficit and may also raise funds from international financial organizations.

The previous issue of $500 million worth Eurobonds with 10 year maturity and 4.2% yield was in 2019 September.

Armenia first issued $ 700 million worth dollar-denominated bonds in September 2013 at the yield of 6.25 percent and a maturity of 7 years. The bulk of $ 700 million was used to repay a $ 500 million Russian loan ten years ahead of schedule. The second issue was carried out in March 2015 in the amount of $500 million with a yield of 7.25% and a maturity period of 10 years.

According to the 2021 budget, the deficit will make 5.3% of GDP or 341 billion drams. The budget calls for one trillion 509 billion drams in revenue and one trillion 850 billion drams in spending.

In late January Moody's Investors Service assigned a rating of Ba3 to the proposed senior unsecured, US dollar-denominated notes to be issued by the government of Armenia. It said Ba3 issuer rating was underpinned by Armenia's robust growth potential with increasingly diverse economic drivers and a lengthening track record of solid macroeconomic management, which raise the country's economic resiliency, and high debt affordability.

It said also that implementation of reforms has the potential to raise the quality and credibility of Armenia's institutions, although tangible effects will likely take time. -0-