Foreign investors view Armenia as a high-risk nation, according to former head of State Revenue Committee
YEREVAN, May 2. /ARKA/. The recent placement of $750 million Eurobonds by the Armenian government, featuring an interest rate of 7.1%, signals a high level of risk perceived by foreign investors, according to David Ananyan, the former head of the Armenian State Revenue Committee.
In a Facebook post, Ananyan explained that elevated yields on Eurobonds typically reflect concerns about a country's political and economic stability, along with indications of low creditworthiness or structural issues within the economy. He noted that the necessity of offering such a high interest rate suggests that Armenia is stretching its domestic debt capacity and is compelled to provide substantial compensation to foreign investors due to the perceived risks involved.
Ananyan further warned that an aggressive approach towards debt accumulation, especially amid weak fiscal discipline—exemplified by a tax revenue shortfall exceeding 7.5% in 2024 against planned figures and unfulfilled fiscal consolidation—will likely result in debt rates outgrowing economic growth.
He cautioned that if the current borrowing is allocated to settle past debts rather than invest in vital areas such as infrastructure, education, and technology, the anticipated “recovery effect” of the debt would be lost. This scenario would hinder the economy's ability to generate sufficient future revenues to manage the new debt burden.
According to Ananyan, Armenia is currently navigating a tough economic landscape characterized by a rising public debt amid nominal economic growth, budget imbalances, and declining tax revenues.
He emphasized that under these circumstances, attempts to enhance fiscal policy and diminish reliance on external borrowing are unlikely to succeed. Ananyan stressed the need for a pragmatic and scientifically grounded approach to public finances, devoid of grandstanding or ineffective rhetoric.
Finance Minister Vahe Hovhannisyan reported at a press conference last week that the demand for the Eurobonds launched on March 5 was nearly three times the issue volume. He acknowledged that the interest rate is notably high, reflecting the surge in market rates in recent years and underscoring Armenia's international reputation and attractiveness to global investors.
The primary purchasers of these bonds included investment companies, pension funds, hedge funds, and banks, with 45% from the UK, 34% from the US, 14% from Europe, and 5% from the Middle East and North Africa. The net proceeds from this bond issuance will be directed towards addressing the state budget deficit.-0-
