Armenia’s national (government) debt rose to US$9.226 billion by the end of 2021, an increase of $1.257 billion (15.8%) over the previous year.

Ministry of Finance data show that both domestic and foreign debt has increased, with the former outpacing the latter.

Armenia's foreign debt, mostly loans from foreign countries and organizations, as of the end of 2021 amounted to $6.643 billion, an increase of $583 million (9.6%).

Of the foreign debt, $6.185 billion is government debt, which has increased by $585 million (10.5%). $458 million is the debt of the Central Bank of Armenia, which has decreased by 0.5% during the year. The debt of both the government and the Central Bank comprises the total foreign state debt of Armenia.

Domestic national debt, mainly generated by government treasury bonds purchased by residents, amounted to $2.583 billion, an increase of $674 million (35.3%).

The Armenian government regularly borrows from foreign countries and organizations to cover planned budgetary expenditures since collected taxes collected and other revenues are not sufficient.  

Armenia’s domestic national debt started to increase in 2016 when the government announced its intention to raise funds from the sale of bonds. 

The increase in the share of domestic debt is mainly explained by the fact that domestic debt is provided and serviced in AMD and is free from the negative effects of dram/dollar exchange rate fluctuations.

Although increasing the share of domestic debt reduces the risk of currency fluctuations, it boosts the burden of public debt ․ As a rule, domestic debt interest rates are higher than foreign debt.

In 2012, according to the Ministry of Finance, 180.8 billion drams were allocated from the state budget of Armenia to repay the interest payments of the national debt. Of this amount, 108.3 billion drams were directed to repay interest payments on domestic debt, and 72.5 billion drams was on foreign debt.

Compared to 2020, the amount allocated for debt interest payments has increased by 16.1 billion drams (8.9%.)

Along with the growth of the state debt, the amount of interest payments is also increasing yearly. Today, some 10% of state budget expenditures are used to pay   debt interest payments. 

Armenia’s national debt exceeds 60% of GDP

While Armenia’s Statistical Committee has not yet summarized 2021 GDP figures, the Ministry of Finance estimates that the country’s national debt will amount to 60.8% of GDP.

While a decrease of 2.7% from 2020, Armenia’s debt-to-GDP ratio now exceeds the European Union’s public debt ceiling of 60% of gross domestic product.

The ceiling was set in the 1992 Maastricht Treaty that founded the European Union. Some experts have called on the EU to revise its debt limit rules.