Armenia’s State Budget and Government Debt. In 2021 the State Budget Revenues Drop, Debt Rises
The total revenues and expenditures of the state budget of the Republic of Armenia (RA) starting from 2008 are presented below in Graph #1. Numbers in USD million, and the exchange rate from AMD to USD is the planned exchange rate presented in the budget message for the given year.
Data points for all years between 2008 and 2019 included are the actual revenues and expenditures of the state budget, the data for the year 2020 show the adjusted plan of the state budget, and the data for the year 2021 are the planned numbers.
The difference between these two curves showing the revenues and expenditures of the budget comprises the state budget deficit, which is mainly financed at the expense of growth of the government debt. This means, when the distance between the blue and red lines grows (and the red curve is under the blue one), the debt of the Government also grows.
As seen in the graph, in 2020, the gap between the two curves has grown, and this means that the budget deficit will be large and will comprise roughly USD 687 million by the end of this year. Consequently, it is assumed that the debt of the Government will increase by about this amount (not taking into consideration the annual debt service). At the same time, from the slope of the curves it appears that, compared with the year 2019, in 2020, the expenditures of the state budget will grow in a larger amount (21%) than the revenues (4%).
The next graph (Graph #2) shows the debt of the Government per annum, starting from 2010 (expressed in USD million).
Note: The Government debt together with the external debt of the Central Bank comprises the public debt of the country.
In the graph, the figure of the debt of the Government for 2020 is presented as of 30 November.
As can be seen from this graph, during 11 months of the year 2020, the debt of the Government compared with 2019, increased by nearly USD 634 million, and reached nearly to USD 7.5 billion as of 30 November. If we take into consideration the payments for the existing government debt service during the year, it can be assumed that the Government borrowed more than USD 634 million during 11 months of 2020. As seen from the blue curve presented in this graph, the rate of growth of the government debt is also rising.
Graph #1 also shows that, compared with the year 2020, the revenues and expenditures of the 2021 state budget will significantly drop. It is estimated that expenses will drop by nearly 7%, and revenues by nearly 9%. In 2021, the state budget deficit will comprise significantly large amount, just like in 2020 (nearly USD 690 million). Since this is, to a great extent, financed with Government debt, it can be stated that in 2021 the debt of the Government will increase in the amount close to the mentioned figure (without taking into consideration the cumulative debt service) and will approach or surpass USD 8 billion.
Note: All the figures presented in the article were taken, the calculations were made and the graphs were prepared on the basis of the official publications presented in the state budgets posted on the website of the Ministry of Finance of the RA.
HOVHANNES AVETISYAN
Expert on public administration and public financial management
Photo by hetq.am
