Finance Minister doesn’t rule out possibility of slightly higher debt-to-GDP ratio by the end of the year

YEREVAN, MARCH 28, ARMENPRESS. There will be no cut in expenditures envisaged by the 2020 state budget, the capital expenditures will be carried out completely, and if the tax revenues would be lower than expected, it will be compensated by attracting state debt in case of necessity, Minister of Finance Tigran Khachatryan said at the session of the parliamentary standing committee on economic affairs.

“We will have a need to borrow funds also in coming years because in most cases these are financial resources directed to privileged development programs which should enable to make investments in infrastructures, key branches of the economy, thus raising the economic growth potential. Respectively both now and in the future we must think of ways of implementing it, which are safe and manageable from macroeconomic perspective”, the minister said.

The heavy year of 2020 ended with 63.5% debt-to-GDP ratio. However, the minister reminded that the government planned to significantly improve this figure in the next five years. “We summed up the year [2021] with 60.3% debt-to-GDP ratio”, he said, considering this a significant improvement.

The government debt in the end of the year comprised 4 trillion 210 billion drams (8 billion 768 million dollars) – 6 billion 191 million dollars external debt, and 2 billion 577 million dollars internal debt. The share of internal debt in the overall debt has significantly improved, reaching around 29%.

Member of Parliament Babken Tunyan was interested in what will be the debt-to-GDP ratio by the end of the year. The minister said it’s early to give assessments. According to him, the macroeconomic uncertainties could have a negative effect on the predicted economic activity and growth rates, which in turn directly affects the tax revenues.

“If this situation has a long-lasting effect, we may end the year with lower tax revenue performance than expected. And our decision is that, by following the situation, we will attract so many necessary additional financial resources which are needed for completely conducting the expenditures approved by the 2022 state budget. And we will not go on the path of cutting the expenditure if tax revenues decline. I think that in terms of performance we will be within quite good indicators, we will seek to implement the capital expenditures with certain increase in debt because the funds to be borrowed, that will compensate the taxes, will be especially additional credit resources. It’s possible that by the end of the year we will have a debt slightly higher than GDP, we envisaged 60.2%, but it may be a little bit higher from that”, he said.

He said they came to this decision as a result of long discussions and joint conclusion with the International Monetary Fund.