The government announced in March that it has issued another Eurobond worth $750 million to manage Armenia’s rising public debt and budget deficit. The dollar-denominated bonds are repayable in 10 years at an annual yield of 7.1 percent. The government’s previous Eurobond issue four years ago carried a much smaller yield: almost 3.9 percent.
“We had a pretty strong demand that was almost three times higher than the volume of our [Eurobond] issue, which is also noteworthy,” Hovannisian told a news conference. “Of course, the yield is nominally quite higher because interest rates in the [bond] market have significantly risen in recent years.”
Hovannisian singled out a major rise in yields on U.S. government bonds, saying that it has inevitably pushed up the cost of borrowing for other countries, including Armenia.
Asked why foreign investor trust in Armenia has not increased since 2021 despite strong economic growth and capital inflows recorded there, he said: “This question also interests me. The reasons for that are not that linear because, as I said, the market is going through a process in which the [yield] spreads of countries like ours have widened.”
Hovannisian blamed the volatile “geopolitical situation” for the fact that Western credit rating agencies continue to assign relatively low ratings to Armenia. He said they will be raised considerably if the country succeeds in signing a peace deal with Azerbaijan. The minister did not explain why Azerbaijan and Georgia already boast higher ratings.
The Armenian Finance Ministry said in March that foreign investors’ strong interest in the latest Eurobond issue testifies to their “long-term trust” and “underscores the stability of Armenia's macroeconomic and financial systems.”
No large-scale Western or other foreign investment projects have been launched in Armenia during Prime Minister Nikol Pashinian’s seven-year rule. Also, the country’s public debt has more than doubled in the same period. It currently stands at almost $13.6 billion, according to Hovannisian.
A senior Finance Ministry official downplayed that increase late last year. He argued that the debt is now equivalent to just over half of GDP, down from 63.5 percent in 2020 and 60.3 percent in 2021.