Maintaining the RA state debt and exceed it if strictly necessary

To maintain the state debt of the Republic of Armenia at the threshold of 60 percent of the gross domestic product (GDP), and, if strictly necessary, exceed it. At the meeting with journalists in Hankavan, within the framework of 2018 state budget discussions, the RA Ministry of Finance presented its program, entitled “Revision and modernization of fiscal rules”.

Atom Janjughazyan, the RA Deputy Minister of Finance, said that the bill envisages  addressing the National Assembly, in the case of sever shock, when it is not possible to solve the problem with the budget structure, and reporting on the poor condition, and on the necessity to attract a new debt that may exceed 60 percent threshold. “We will have to justify that the economic pressure and shocks are so great that they must go through legislative changes and exceed the threshold of public debt. At the same time, we will also introduce the mechanisms with the help of which we will return to the intended threshold. If we fail, then sanctions will be applied against us, up to the government’s resignation.”

To the question as to which economic shocks would be considered as the basis for exceeding the threshold of public debt, Mr. Janjughazyan noted that it was impossible to regulate it by law. “We do not have so much flexibility to define the types of shocks by law. Currently we are looking for ways of setting rules, restricting ourselves in order not to take too much public debts, and decrease our expenses. By the way, Armenia is viewed as a middle-income country, and due to that the privileged segment decreases in the loans granted to us.”

This program is elaborated by the RA Ministry of Finance with the support of the International Monetary Fund. Armen Hayrapetyan, Deputy Minister of Finance, said that as a result of the crisis, deficits had increased in all countries of the world, and the accumulation of deficit had resulted in the increase in debt, resulting debt level increase in all countries.  In Armenia, fiscal policy has been anti-cyclical in recent years. Meanwhile, in 2009 the crisis was neutral or expanding.  “2016 the state debt exceeded 50 percent. Until 2008 the debt dropped to 13% of GDP, then there was the exchange rate effect, and now the debt has risen above the balance sheet because of the sharp fluctuations of the last exchange rate which took place in 2015.”