Armenia is preparing to revise the concept of “public debt” to align it with international standards. The legislative initiative, developed by the Ministry of Finance in collaboration with the International Monetary Fund (IMF), has already received a positive opinion from the relevant parliamentary committee. The proposal suggests excluding the Central Bank’s external obligations from the public debt composition and including municipal debts. This will provide a more accurate and transparent picture of the country’s financial situation.
During the October 13 session of the Standing Committee on Financial-Credit and Budgetary Affairs, Deputy Finance Minister Avag Avanesyan explained that Armenia’s current accounting system does not fully comply with international norms. A joint analysis with IMF experts revealed that the Central Bank’s external debt and state guarantees were mistakenly recorded as part of direct public debt, while municipal debt obligations were not consolidated in this indicator. The proposed amendments to the Law “On Public Debt” address this issue by clearly distinguishing between the obligations of the government and the Central Bank.
The primary goal of the reform is to establish a modern and transparent public debt management system that is understandable to international financial institutions and investors. Additionally, the draft law establishes clear powers for the Ministry of Finance to issue government securities and introduces new concepts, such as “contractual contingent liability,” to address practical issues emerging in the financial sector. The package of legislative proposals has received a positive opinion from the committee and is ready for discussion at the first reading in the plenary session of the National Assembly.
The draft suggests excluding the Central Bank’s external obligations and state guarantees from the public debt composition, while incorporating municipal debts, which can only be financed from domestic sources. This change will provide a more accurate picture of Armenia’s financial situation. Additionally, the concept of “public sector debt” is introduced, encompassing public debt as well as the debts of public sector financial and non-financial organizations.
The draft revises the objectives of public debt acquisition and its management principles to align with international best practices. The Ministry of Finance is granted clear authority to issue government securities, and a requirement is established for the development and publication of an annual borrowing plan. Furthermore, the authorized body is empowered to make changes stipulated by international loan agreements after they enter into force.
Provisions related to guarantees are transferred to the Law “On the Budgetary System of the Republic of Armenia,” ensuring comprehensive regulation of budgetary guarantees. The concept of “contractual contingent liability” is introduced, and conditions are set for including such obligations in public debt. For instance, if the government’s debt at the end of the previous year exceeds 60% of GDP, new contingent liabilities or obligations arising from budgetary guarantees are prohibited, except when included in the state budget approved by the National Assembly. If the combined total of government debt, contractual contingent liabilities, and obligations from budgetary guarantees exceeds 70% of GDP, a similar restriction applies, except for guarantees secured by primary collateral with a market value of at least 120% of the guarantee.
Moreover, the legislation mandates that the annual state budget execution report include information on contractual contingent liabilities, budgetary guarantees, and obligations arising from concession agreements. Regulations are also established for the publicity and accountability of public and public sector debt, and the mechanism for investing the inviolable capital of foundations in government treasury bonds is revised. These changes aim to create a modern and transparent public debt management system that meets the requirements of international financial institutions and investors.