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Yerevan Confirms British Offer Of Debt Relief

By Atom Markarian

Armenia’s government confirmed on Wednesday reports that Britain is ready to repay 10 percent of its external debt as part of a broader effort to help some of the world’s poorest countries.

Finance and Economy Minister announced that Yerevan received a formal offer of debt relief from the British government earlier in the day and will gladly accept it. “We have an offer from the British government to take over 10 percent of our external debt,” he told a news conference.

Khachatrian said he will meet with the British ambassador to Armenia, Thorda Abbott-Watt, in the coming days to discuss details of the scheme unveiled on Sunday by the United Kingdom’s finance minister, Gordon Brown. Brown said it will cover 19 mostly African nations.

Armenia’s inclusion in the list took local observers by surprise. Despite its grave economic woes, the country has never fallen behind schedules for servicing its debt which currently totals $1.15 billion or 37.7 percent of its 2004 Gross Domestic Product. The proportion is well below the internationally accepted threshold for heavily indebted nations. The debt burden of other former Soviet republics, notably Georgia and Tajikistan, is much heavier.

The British offer was all the more unexpected given the fact that the UK has not been among Armenia’s leading Western donors. The bulk of the debt is owed to the World Bank and the International Monetary Fund. The Armenian government plans to spend $62 million on its repayment this year.

“Armenia today has no trouble repaying its debts,” Khachatrian said. “It’s a very light burden. But on the other hand, we are still a poor country with many problems. We do need to channel [additional] money into the social sphere.”

Khachatrian added that he views the British debt relief as a reward for Armenia’s strong macroeconomic performance and prudent fiscal and monetary policies pursued by its leadership. “If I say that it’s all down to Armenia’s macroeconomic indicators and responsible debt servicing, it might sound as if the government is again indulging in self-advertising,” he said. “But Armenia’s standing with international financial structures and donor countries is really good.”

The hefty financial assistance promised by British Prime Minister Tony Blair’s government contrasts with a controversial equities-for-debt agreement reached by the Armenian and Russian government’s two years ago. Under that agreement, Moscow was granted ownership of five Armenian enterprises, including a big thermal power plant, in return for writing off Yerevan’s $100 million debt.

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