By IndraStra Global Editorial Team With its shuttered banks, furious public protests and iconoclastic politicians, the plight o...
By IndraStra Global Editorial Team
With its shuttered banks, furious public protests and iconoclastic
politicians, the plight of Greece's economy, brought to its knees by a
crippling debt burden, has been gripping and heartbreaking in equal measure: a
full-blown sovereign debt crisis on the doorstep of some of the wealthiest
countries in the world.
Yet new analysis by the Jubilee Debt Campaign reveals that Greece’s
plight is far from unique: more than 20 other countries are also wrestling with
their own debt crises and Armenia is one of them.
source: tradingeconomics.com
Comparison with Greece:
source: tradingeconomics.com
According to EurasiaNet.Org columnist Gayane Abrahamyan -
"For some, Armenia’s debt picture is conjuring up images of Greece, though
admittedly on a much smaller scale. The tiny South Caucasus country’s $4.6
billion in foreign debt is just a sliver of that which EU-member Greece ran up
(360 billion euros, or just over $400 billion, at its height), and Yerevan’s
predicament has far fewer potential implications for the international
financial system. But on a basic level, some observers in Yerevan are
questioning whether the Armenian government is following a Greek pattern by
using infusions of outside cash to cover fiscal gaps and postpone economic
reforms."
Causes behind Armenian Economic Crisis:
Armenia is having a transition economy, i.e., Transition countries were mostly affected by the fall in global demand
and commodity prices in 2009-2010. As a result of the fall in exports,
remittances,and FDI, GDP has slowed down or fallen drastically. Armenia’s
foreign debts have increased by roughly 300 percent over the past seven years,
and now account for 46.6 percent of its 2015 Gross Domestic Product of over 4.5
trillion drams ($9.63 billion), according to the country’s Central Bank. The
International Monetary Fund already has expressed concern about that debt load.
At
nearly $1.6 billion, the World Bank holds roughly 40 percent of Armenia’s
foreign debt, the highest portion, the Central Bank states. The IMF ranks as a
distant second, with over $442 million, or about 12 percent of the official
total. The Asian Development Bank has provided $300.6 million, or nearly 8
percent of the load.
Possible
Solutions:
- Develop
Indigenous Industries and Increase Exports
- Provide
Flexible Remittances Opportunities along with Investment Growth to
Armenian Diaspora
- Increase
FDI
It
has been found, the problems in the Real Estate sector is creating problems in
financial sector
- Mitigation
of Credit risk
- Lowering the Exchange
rate risk
- Avoiding
the Liquidity risk
But all these solutions and risk mitigation options cannot be
implemented in a year time. Armenia had its time from 2010-2013 to do the
necessary deployment of fiscal and monetary stimulus, increase financial sector
supervision, and restructuring of structural reforms. But, the country has
failed miserably.
With its shuttered banks, furious public protests and iconoclastic
politicians, the plight of Greece's economy, brought to its knees by a
crippling debt burden, has been gripping and heartbreaking in equal measure: a
full-blown sovereign debt crisis on the doorstep of some of the wealthiest
countries in the world.
Yet new analysis by the Jubilee Debt Campaign reveals that Greece’s
plight is far from unique: more than 20 other countries are also wrestling with
their own debt crises and Armenia is one of them.
Armenia Gross External Debt 1999-2015
External
Debt in Armenia increased to 8595.46 USD Million in the second quarter of 2015
from 8519.52 USD Million in the first quarter of 2015. External Debt in Armenia
averaged 3920.82 USD Million from 1999 until 2015, reaching an all time high of
8771.18 USD Million in the third quarter of 2013 and a record low of 1155.60
USD Million in the first quarter of 1999. External Debt in Armenia is reported
by the Central Bank of Armenia.
source: tradingeconomics.com
Comparison with Greece:
source: tradingeconomics.com
According to EurasiaNet.Org columnist Gayane Abrahamyan - "For some, Armenia’s debt picture is conjuring up images of Greece, though admittedly on a much smaller scale. The tiny South Caucasus country’s $4.6 billion in foreign debt is just a sliver of that which EU-member Greece ran up (360 billion euros, or just over $400 billion, at its height), and Yerevan’s predicament has far fewer potential implications for the international financial system. But on a basic level, some observers in Yerevan are questioning whether the Armenian government is following a Greek pattern by using infusions of outside cash to cover fiscal gaps and postpone economic reforms."
Causes behind Armenian Economic Crisis:
Armenia is having a transition economy, i.e., Transition countries were mostly affected by the fall in global demand and commodity prices in 2009-2010. As a result of the fall in exports, remittances,and FDI, GDP has slowed down or fallen drastically. Armenia’s foreign debts have increased by roughly 300 percent over the past seven years, and now account for 46.6 percent of its 2015 Gross Domestic Product of over 4.5 trillion drams ($9.63 billion), according to the country’s Central Bank. The International Monetary Fund already has expressed concern about that debt load.
At
nearly $1.6 billion, the World Bank holds roughly 40 percent of Armenia’s
foreign debt, the highest portion, the Central Bank states. The IMF ranks as a
distant second, with over $442 million, or about 12 percent of the official
total. The Asian Development Bank has provided $300.6 million, or nearly 8
percent of the load.
Possible
Solutions:
The global debt crisis has thus far affected Armenia mostly through
tangible channels (global demand, commodity prices):
- Develop
Indigenous Industries and Increase Exports
- Provide
Flexible Remittances Opportunities along with Investment Growth to
Armenian Diaspora
- Increase
FDI
It
has been found, the problems in the Real Estate sector is creating problems in
financial sector
- Mitigation
of Credit risk
- Lowering the Exchange
rate risk
- Avoiding
the Liquidity risk
But all these solutions and risk mitigation options cannot be
implemented in a year time. Armenia had its time from 2010-2013 to do the
necessary deployment of fiscal and monetary stimulus, increase financial sector
supervision, and restructuring of structural reforms. But, the country has
failed miserably.
