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The problem is that there are no projects in Armenia that can attract the attention of large institutional investors

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One should not expect the growth of the Armenian economy to a level when it will be able to cover new loans in the medium term. The source of payments on credit  obligations, as before, will be only tax revenues and state revenues,  Aza Mihranyan, a leading researcher at the Center for Post-Soviet  Studies of the Russian Academy of Sciences, expressed such an opinion  to ArmInfo.

"We should take into account the realities, the state budget, the  pace of its replenishment and, of course, the level of the tax base.  If new loans are taken under state guarantees, but they are not  self-sustaining this may lead to deterioration of financial situation  and the emergence of a budget imbalance in general. In the context of  the observed lack of specific sources of borrowing, specific projects  for financing, and most importantly, an understanding of the general  situation, an increase in the debt burden is undesirable," she noted.

The situation, according to the expert, is aggravated by the fact  that the drivers of economic growth remain the field of information  technology, tourism and services. Meanwhile, in her opinion, it is  necessary to make every effort to increase the level of productivity  in such traditional sectors as agriculture, mining metallurgy and  chemical industry.

According to Mihranyan, large-scale investment projects for which  large loans could be issued by international, institutional and  strategic investors, today simply do not exist in Armenia. Meanwhile,  any external borrowing, including from the EAEU country, also  requires specific projects.  To note, today Armenia demonstrates the  best indicator in the countries of the EAEU and even Europe in terms  of GDP growth rates. In the first quarter of 2019, it was 7.1%. In  the state budget of the Republic of Armenia for 2019, GDP growth of  4.9% is laid, however, according to the updated at the end of June of  this year forecast of the Central Bank of Armenia, the range of GDP  growth in Armenia for 2019 has been significantly improved - to  5.9-7.4% against the previous 4.6-6.1%. Such a revision of the  forecast for GDP growth for 2019 was explained by the Central Bank to  higher than expected economic growth in the first quarter (by 7.1%  per annum) and a high probability that this trend will continue in  subsequent quarters of this year. The CBA explained an increase in  the range of projected growth by maintaining high growth rates in the  service sector and partly by activating the industrial sector, as  well as the expected significant increase in private consumption.

The national debt of Armenia grew in the first half of 2019 only by  0.2%, without actually moving from the level of $ 6.9 billion (3.3  trillion drams). According to the Ministry of Finance of the Republic  of Armenia, in its structure, external debt decreased by 1.4% in the  first half of the year to $ 5.5 billion (2.6 trillion drams), and  domestic, by contrast, grew by 6.3% to $ 1.5 billion (705.1 billion  drams).  In particular, during the reporting period, the government's  external debt decreased by 1% to $ 4.9 billion, while the Central  Bank's foreign debt dropped by 4.5% to $ 525 million. Moreover, in  the external debt of the Central Bank of Armenia, the share of  government guarantees loans was 26% or $ 136.5 million, with a  six-month decline of 4.2%.

From external sources, the government attracted loans as of July 1,  2019 in the amount of $ 4.1 billion (with a six-month decline of  0.7%). In particular, the volume of loans attracted from  international organizations amounted to $ 3.2 billion at the  reporting date (half-year decline by 0.8%), from foreign countries -  $ 931.5 million (half-year decline by 0.01%), from commercial banks -  $ 21.7 million (half-year decline by 4.4%).


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