Armenian opposition MP says social crisis is looming
YEREVAN, August 10. /ARKA/. Opposition MP Vahe Hakobyan from the Hayastan (Armenia) alliance, warned today the country may face a social crisis because of the growing national debt.
"We closed 2020 with an economic decline of 7.5% and found ourselves in an economic crisis. It was added with a political crisis that worsened the overall situation and now another crisis is looming ahead - a social crisis," he said at a meeting of parliament.
According to Hakobyan, the economic policy of the ruling Civil Contract party of prime minister Pashinyan is based on meeting current expenditures through attraction of new loans.
"It's like a situation when citizens take a loan to repay a loan taken earlier, then they take a third loan, and so they find themselves in a debt trap," he explained.
According to the MP, Armenia is now on the verge of a debt trap, since the ratio of public debt to GDP has exceeded the threshold of 60% and is approaching 70%, worsened by 5.7% inflation. According to the deputy, in this situation it is necessary to reduce current expenses, to establish fiscal consolidation for the coming years to stabilize the state debt.
"At the same time, there is a need for legislative changes, implying tough measures that will create a favorable environment for businesses. From now on, loans taken by the state should be directed exclusively to capital expenditures," he said.
On July 1, then acting Prime Minister Nikol Pashinyan said the economic growth projection for 2021 had been revised upward- from the previously forecast 3.2% to 6 %. Earlier, on June 15, Armenia's Central Bank chairman Martin Galstyan said the regulator had again revised upward its economic growth forecast for 2021 to 4.6%.
The World Bank forecasts for 3.4% growth for 2021, 4.3% for 2022 and 5.3% for 2023. The IMF expects 1% growth in 2021. According to S&P Global Ratings, Armenia's real GDP growth will be 2.5% in 2021 and 4.5% in 2022-2023.
Armenia's total public debt stood at $8,772.839 million in late April 2021, having grown by $120.830 million from the previous month, according to the National Statistical Committee (NSC). On December 31, 2020, the country's total public debt was worth $7,968.486 million.
In 2020, Armenia attracted $340 million in fresh loans, the bulk ($300 million) from IMF. At the beginning of 2021, almost 75% of the government debt was in foreign currency. When the level of government debt exceeds 60% of GDP, the possibilities of increasing the current midterm expenditures are limited by fiscal rules.
In early 2021 the government sold Eurobonds in the amount of $ 750 million with a maturity of 10 years and 3.8% yield. Investor demand exceeded $ 2.5 billion. Moody’s has assigned a Ba3 credit rating to the Eurobonds with a “stable” outlook. -0-
