Adopted in the first reading by the National Assembly of Armenia, amendments to the law "On State Debt" have caused concern among many economists. The fact that the new changes would be replaced by the concept of public debt and government debt are generally aimed at changing the structure of government debt. The law, which was in action before, defined foreign debt as common for government and the central bank. In addition, the law limits the amount of external debt at around 60% of GDP. The new government bill separates the duty of the government debt from the Central Bank and puts a limit of only 60% on government debt.
Armenia's external debt currently stands at 4.6 billion dollars, or 52.8% of GDP. The IMF forecasts that by 2020 it will grow to 62%. It should be noted that Russia's foreign debt amounts to 18.8% of GDP, Kazakhstan – 17.2%, Georgia – 44.2% and Iran – 11.9% of GDP.
The Deputy Minister of Finance, the chief treasurer of Armenia, Atom Janjughazyan, is convinced that thanks to the new law the Central Bank will have additional opportunities for loans.
According to the head of the analytical center ‘Alternative’, economist Tatul Manaseryan, elimination of public debt because of obligations of the Central Bank has become common in international practice, and the government's proposed amendments do not entail negative consequences for the Armenian economy.
However, experts and opposition politicians view with great suspicion and distrust to the government's initiative, believing that the change in the structure of public debt will open new opportunities for further accumulation of debts on loans.
According to the MP from the faction ‘Dashnaktsutyun’, Artsvik Minasyan, the amendments are far from technical in nature and this raises serious concerns: "The desire of the government to remove the restriction of external debt demonstrates the complexity of the situation, that is, it is so bad that the authorities are forced to think, where they can get money. "
"From now on, the Central Bank may borrow without limitation, as a result of the proposed amendments the limits spread only to the government debt, which means that the authorities are trying to increase the size of the state debt of Armenia," the secretary of the parliamentary faction ’Armenian National Congress’, Aram Manukyan says.
The economist Vagn Khachatryan has the same opinion, according to which the division's external debt will allow the government to rely on additional loans for budget expenditures.
External debt by itself is not so terrible if it is spent effectively, purposefully and not diverted. In Armenia, however, external loans were ineffective from the standpoint of economic development.
Compared with 2008, the national debt has tripled. So, in 2008, the external debt stood at $1.5 billion, or 13% of GDP. In recent years, Armenia has accumulated a foreign debt which is close to $5 billion. However, the economy is not developed, but is staying 'afloat'.
Over the past 7 years, Armenia's GDP fell from 11.6 billion to 10.9 billion. In recent years, the country has recorded a decline in external trade turnover of about 2-2.5 billion dollars, while the volume of transfers in 2015 fell by 40%. The state's service of the external debt is mainly due to exports and transfers.
According to some experts, the possibility of unlimited central bank loans with a fall in exports and the volume of transfers threatens default for the Armenian economy. Armenia is at risk of the same fate as Greece, which, despite the number of economic reforms that were undertaken, such as pension reform and budget cuts, has been declared insolvent.
The Armenian authorities, despite the negative situation in the economy voiced by representatives of the IMF, continue to solve the accumulated economic problems at the expense of new debt. As a result, Armenia gets more and more into financial dependence on the creditors, mainly from Russia and the West, which can make it vulnerable to external players. However, the Armenian authorities have not taken any steps for the development of the economy that can eliminate the need for new borrowing. For a real development of the economy there is a need to take a number of important steps, including limiting or even eliminating the monopoly way of economy. But this directly contradicts the interests of the ruling administration, which is interested in the preservation of the monopolies in the economy as one of the basic conditions for the ruling party to monopolize political power.
Thus, the authorities have opted for a workaround for a solution of economic problems rather than taking Armenia on the path of development, and this plunges the country and its people into a 'black hole', where all the loans inexplicably disappear, and the economy continues to barely breathe.
