Fitch Ratings: Armenia’s public debt to grow to 63% of GDP in 2020

YEREVAN, October 6. /ARKA/. Armenia’s external vulnerabilities, including high and growing net external debt, a relatively large structural current account deficit, a reliance on remittances and relatively weak FDI inflows, remain in place, Fitch ratings said in a report.

However, the balance of payments has been relatively stable since the initial phase of the coronavirus shock. Having depreciated 5% against the US dollar in March, the dram has returned to close to the pre-pandemic level since end-April. The Central Bank has not intervened since USD94 million of net FX sales in March and April to support the normal functioning of the FX market, and net interventions for the year as a whole are lower, at USD36 million.

General government debt is forecast to rise from 53.5% of GDP at end-2019 to 63.9% at end-2020, above the ‘B’ median of 58.1%. We forecast that government debt will continue to rise to 65.6% of GDP in 2021 (9.6pp above our previous forecast) and to remain elevated over the medium term, reflecting a combination of weaker growth impacted by economic damage from the health crisis and further spending pressures from fiscal measures to support the economy. 76% of government debt is foreign-currency-denominated, compared to the ‘B’ median of 61%, giving rise to exchange rate vulnerability.

Armenia’s total public debt at the end of July 2020 stood at $7.939, 525 billion, an increase of $220.682 million from the previous month.

Since the beginning of the year, the total public debt has grown by $618,269 million. According to the National Statistical Committee, the external public debt at the end of July 2020 amounted to $6.055, 237 billion, an increase of $73.591 million from the previous month.

About $5.576.651 billion of the external debt were owed by the Armenian government (an increase of $70.015 million), and $478,586 million were owed by the Central Bank (an increase of $3,576 million).

Armenia’s domestic debt at the end of July amounted to the equivalent of $1.884.288 billion, an increase of $147.092 million. About $1.742.302 billion were owed to resident holders of government bonds and $141,986 were owed to holders of foreign currency denominated bonds. -0-

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