Journal article Open Access
Ashot Matevosyan; Ani Grigoryan
Sustainability of the public debt is a necessary condition for macroeconomic stability and long-term economic growth. However, in order to be sustainable, the government must service the debt without declaring insolvency, renegotiating the terms of the debt or restructuring the debt, as well as without introducing unrealistic big pressure into economic policy.
Regardless of the debt and the burden of its servicing, over the past decade, the RA Government has managed to service the public debt of the RA on time and in full. However, this circumstance is not enough for full-fledged judgments about stability. To ensure stability, it is necessary to identify all possible risks and sources of vulnerability, so that the behavior of debt in the event of these risks becomes figurative.
The analysis of public debt stability was carried out on the basis of the MAC DSA (Debt sustainability analysis for market-access countries) methodology of two reputable financial structures widely used in international practice -the International Monetary Fund and the World Bank.
As a result of the analysis, it was revealed that:
1. Although the debt of the RA Government is manageable, it is nevertheless sensitive to economic growth and exchange rate shocks. 2. Sources of vulnerability for government debt are also high risk for non-residents - the share of debt and the share of debt in foreign currency, as well as the requirement for external financing of the economy. 3. In order to maintain the risks of government debt at a low level and reduce financing risks, it is necessary to continue reducing the debt burden in accordance with fiscal rules, the policy of improving the weight of domestic debt and take steps to maintain financial stability, further deepen and develop the market.
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