Tax gossips
Foreign debt issue has become a topic of active discussions again. During the past years foreign debt issues have never been discussed so much in the society. In 2001 Armenia’s foreign debt crossed the limit of one billion dollars for the first time. In the end of 2008 Armenia owed 1,577 bln to different international institutions. At that time nobody was thinking that during the consecutive three years the foreign debt would grow so fast. In 2008 Armenia’s government took a huge borrowing from Russia – $500 million. At that time an agreement was made to take this borrowing.
Currently there are different contradicting opinions about this borrowing. Businessman Paylak Hayrapetyan told journalists that Russia was going to offer to give 100 million out of that amount to Armenia with means and forms other than financial. According to this businessman, in a discussion with the ministry of economy Armenia was offered to import diamond worth of 100 million to Armenia. This diamond would supposedly be imported and cut in 23 companies. Experts say this is not a justified deal. It will only add up to the foreign debt amount. There have been many situations when the government took foreign debt without having a clear plan where and how to use that money. This is one of the proofs. Our government often takes borrowings with political reasons. This also helps to ease the tension in different sectors. Also, when covering the debt there are extra opportunities to “embezzle” a part of that money.
This is how 12-13% of the Russian borrowing was directed at construction in the earthquake zone. However, it is not clear what is going to happen with the remaining amounts. A part of that money was given to several enterprises, and the other part was given to so called “stability foundation”. Either businessman Paylak Hayrapetyan confuses something or the government is not speaking the truth. According to official information, the Russian borrowing of 500 million was fully transferred to the state budget in 2009. However, even the official information does not give a precise answer for us to see if the government is misleading or no. When submitting the bill for approval of the credit by the parliament, the government claimed that Russia would give the borrowing with privileged conditions.
After the deal with Russia that was called “property against debt” it became clear that Russia was the strictest one to demand paying back. Since 1994 in our relation with Russians they have never agreed to revise the terms of debt coverage. Even more, they imposed sanctions against all payment delays. The same official information shows that the Russian borrowing does not have privileged conditions. In 2009 Armenia paid 10,820 mln dollars as interest rate. In 2010 the interest rate amounted 18,270 million, and in 2011 – 6,220. These high interest rates show that the Russian borrowing is a normal trade credit. Is there sense to take borrowing with high interest rate and finance the economy? In 2009 due to the Russian borrowing the foreign debt of Armenia reached 2,967 billion dollars. At that time Russia became the owner of our foreign debt’s 20,5%. In 2010 the foreign debt became 3,299 billion, and in 2011 – 3,568 billion dollars.
Before the international crisis the macroeconomic books used to urge that the foreign debt of a country should not exceed 50% of the GDP. The countries with over 40% of foreign debt used to be considered hopeless. Now the situation is different and they even don’t speak about 50% when talking about Spain, Greece, Portugal and several other countries. However, the situation is different in those countries and in our country elections are coming up and the government is borrowing money from all possible and visible sources without having a clear plan on what they are going to do with that money. Of course we are not speaking of embezzling that money.
