Economy of Armenia - Foreign Debt

Foreign Debt

Armenia's national debt has increased significantly since 2008 when public external debt consisted of only 13.5 percent of GDP. By the end of 2010, Armenia’s external debt is projected to form about 42 percent of GDP, and 50 percent in 2012.

As of late November 2009, the Armenian government's foreign debt was around $3 billion USD, having doubled in size over the course of the previous year. With the Armenian government needing more anti-crisis loans from the World Bank and other foreign donors, the debt-to-GDP ratio is expected to exceed 40 percent in 2010. According to a World Bank official, a country that has around 12 percent rate of growth or even lower, at the range of 7 to 8 percent, can afford a level of public debt of up to 50 percent. The official warned that the debt servicing payments of the Armenian government will surge by 2013 and absorb "quite significant part of tax revenues."

According to another estimate, the ratio between the country's Gross Domestic Product (GDP) and the state's foreign debt has reached 46 percent. Economists generally agree that a country is insolvent, if its foreign debt surpasses 50 percent of its GDP. Critics of the government say that the $500 million credit from Russia should have gone to develop industry, instead of going to the construction sector.