Why the State Preferred New Loan Obligations

Yesterday, the parliament ratified agreements to take loans amounting to €131.5 million from the Asian Development Bank, the Development Bank for Reconstruction and the International Bank for Reconstruction and Development. Only members of the ‘My Step’ faction voted in favor of the projects.

Why has our country been granted low-interest loans? Why did the state choose to take on new loan obligations when there are deposits in the Central Bank? Why are the loans for budgetary support rather than targeted purposes? These questions have been clarified by Gevorg Papoyan, a member of the permanent commission on economic issues of the National Assembly.

Speaking about economic feasibility, he noted that the average interest rate of loans previously taken by the state is 2.5%, while the average for these agreements is only 1.6%. “Even if we had no other place to spend, we could have closed any loan with a 2.5% rate with that money,” he said.

If 7-8 years ago the interest rate of Eurobonds issued by our state was 5-7%, one of the reasons for this was that, for example, Moody's and Fitch had a poor rating for Armenia, there was corruption, and GDP and wages were not growing.

“Today, the economic situation in our country is quite good, first of all, we have a fairly high economic growth reaching 7.2%, the highest in the European region, the EAEU, and also in our region. Systemic corruption has been overcome, and international rating agencies have raised our country’s rating. When a country’s rating rises, naturally, confidence in us increases, and we become a more reliable partner. As a result, interest rates also decrease, and the volumes of loans granted increase,” the MP added.

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