Armenia Faces 40 Years Under Heavy Foreign Debt, Says Minister

YEREVAN (Combined Sources)–Amidst predictions that Armenia’s economy may shrink by as much as 20 percent, Yerevan has received an $80 million pledge of assistance from the Asian Development Bank (ADB).

With the loan, Armenia will have received $790 million in economic support from international donors since the onset of the global economic crisis last year, the government announced on July 7.

Speaking to A1plus news service, Armenian Finance Minister Tigran Davtian said the country will be saddled with heavy foreign debt for up to 40 years.

The ADB funds complement assistance from other multilateral agencies and bilateral sources. The International Monetary Fund, World Bank, Asian Development Bank, and Russia have all rushed emergency aid to Armenia. The country is increasingly hamstrung by sharply reduced economic activity, a drop in foreign remittances, and a credit crunch. A large part of the loans will be used to resuscitate economic activity.

Davtian confirmed that part of the cash will be used to cover an unprecedented 7.5 percent state budget deficit. “[Loans] will provide serious guarantees that we will fulfill all the obligations assumed in the state budget for this year,” Davtian said, according to A1plus.

But he did not elaborate on how exactly the loans would boost economic growth. He did say, however, that interest rates on the loans are “very low.”

According to the bank, the new loan will allow the Armenian government “to deal with negative shocks to budget revenue and maintain core spending programs for critical social needs such as welfare payments and social services for vulnerable groups.”

“ADB’s programs, in tandem with the initiatives of other development partners, will support essential public spending to protect the poor and vulnerable, as well as aid in the revival of the economies of the three countries,” said Xiaoyu Zhao, vice president of ADB’s operations in the region. “It will also allow them to push through with public investments designed to preserve and create new jobs for economic recovery.”

The ADB also issued an $80 million loan to Georgia and a $40 million loan to Tajikistan as part of $200 million package to help the three countries sustain critical social spending programs that have been imperiled by the global economic crisis. ADB has extended assistance amounting to a total of $381 million to Armenia since it joined in 2005.

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