The higher the debt, the lower the welfare – Alpha Economics

Armenia’s public debt continues to rise. As of November, it stood at $14.2 billion, compared to $14.17 billion in October. Although October saw a slight decrease from the previous month, the November figure shows that this was merely a temporary effect. In reality, Armenia’s debt burden continues to grow.

The largest share of the public debt structure is government debt, which accounts for $13.7 billion. The composition of the debt is significant and has long been the subject of conflicting assessments.

Within the government debt structure, domestic debt exceeds external debt. This is a positive signal in terms of reducing the risk of currency fluctuations, keeping financial resources inside the country, and lowering dependence on external factors. At the same time, it creates problems, since domestic funds are generally more expensive, which increases the burden on the budget.

It is worth noting that interest payments on public debt servicing, as provided in the budget, account for 11.7% of total expenditures—almost twice the amount spent on healthcare. In effect, funds allocated to debt servicing reduce spending on healthcare, social protection, and other needs. In other words, the more the debt grows, and consequently the heavier the burden of servicing it, the more the population’s well‑being declines.

A simple example illustrates this: in recent years, prices for basic consumer goods have risen, often several times over, while pensions have remained stagnant. Pensions have not increased, partly because the budget is weighed down by debt servicing. In this sense, the picture is objective. To truly assess the situation objectively, it is important to understand why these funds are borrowed and what purposes they are spent on.

In short, the issue is one of effective debt management. Considering how many times the growth of debt has been justified, or how often claims have been made that Armenia has no financial problems, and taking into account this confusion, there is reason to believe that the debt burden is increasing—and this circumstance raises many questions.