Eurobonds: financial victory or new debt?

The fifth stage of Eurobond placement has recently been announced. Bonds worth $750 million have been issued, carrying a yield of 7.1%.

Of course, there are many questions concerning this operation—ranging from the high interest rate to the identity of the bond buyers distributed by the Republic of Armenia. By the way, the Ministry of Finance stated certain risks and promised a press conference with answers to clarifying questions. Meanwhile, we would like to provide an overview of the Eurobond issuance process.

Eurobond yields had a downward trend but then rose sharply with this latest issuance. This means that the loan secured by these bonds will come at a high cost to Armenia. It should be noted that factors such as the country’s credit rating, macroeconomic stability, and debt manageability significantly influence Eurobond pricing.

However, the interest rate is actually quite high. Of course, in this sense, the average interest rates in the market at that moment are also a factor. There are many such issues that require serious analysis. However, one fact remains indisputable: foreign debt is increasing, and consequently, so is the national debt. The situation in this regard is already quite alarming. As of February, Armenia’s national debt has surpassed $13 billion.

The new Eurobonds worth $750 million, even if a substantial part of the funds is allocated to repay the previous debt, will still contribute to an overall increase in the country’s debt burden.