Important notice

Notes:

As of 31 December 2014, total amounts outstanding under domestic guarantees issued by the Government (which are classified as Internal Public Debt) equalled U.S.$2.1 million. The Government also issues external guarantees; total amounts outstanding under such guarantees equalled U.S.$149.9 million as of 31 December 2014. All external guarantees issued by the Government are provided to the CBA and, to avoid double counting, are included in the External Public Debt of the CBA and not the Government.

As of 31 December 2013, total external debt of Armenia, which includes private external debt and External Public Debt, amounted to U.S.$8,694.6 million, or 83.4% of GDP. As of 30 September 2014, total external debt of Armenia amounted to U.S.$8,306.3 million.

Internal Public Debt

Internal Public Debt consists of (i) Government securities acquired by residents of Armenia; (ii) commercial loans issued by residents of Armenia to the Ministry of Finance; and (iii) domestic guarantees issued by the Government (the “Internal Public Debt”).

As of 31 December 2013, Internal Public Debt amounted to AMD279.6 billion, or 6.5% of GDP. As of December 2014, Internal Public Debt amounted to AMD311.7 billion.

The following table sets forth information on Internal Public Debt as of the indicated dates:

Notes:

(1) As set forth in the relevant annual Budget Message.

The following table provides information on the maturity profile of Armenia’s domestic government securities based on time to redemption:

Note:

(2) Includes T-bills and savings bonds with maturities of up to one year.

As of 31 December 2014, Government securities amounted to AMD308.8 billion (U.S.$650.2 million), comprising 99.1% of Internal Public Debt. Government securities consist mainly of medium-term and long-term bonds and to a lesser extent T-bills, Eurobonds held by Armenian residents and savings bonds. The remaining Internal Public Debt as of 31 December 2014 comprised one commercial loan from a local bank, equaling AMD1.9 billion (U.S.$4.0 million), and domestic guarantees, equaling AMD1.0 billion (U.S.$2.1 million).

Medium-term bonds are fixed rate, dram-denominated obligations with maturities of between one and five years. All of Armenia’s outstanding medium-term bonds bear either three- or five-year maturities. Medium-term bonds have become an increasingly significant component of Internal Public Debt. As of 31 December 2010, outstanding medium-term bonds amounted to AMD85.9 billion, or 46.8% of total Internal Public Debt. As of 31 December 2014, the outstanding amount of medium-term bonds was AMD150.6 billion, or 48.3% of total Internal Public Debt. As a share of total Internal Public Debt, medium-term bonds fell from 52.5% as of 31 December 2013 mainly because of an increase in outstanding long-term bonds and in Eurobonds held by Armenian residents. In 2014, a total of 13 auctions of medium-term bonds took place.

Long-term bonds are fixed rate, dram-denominated obligations with maturities of six years or longer. All of Armenia’s outstanding long-term bonds bear either 10- or 20-year maturities. As of 31 December 2010, outstanding long-term bonds amounted to AMD34.5 billion, or 18.8% of total Internal Public Debt. As of 31 December 2014, the outstanding amount of long-term bonds was AMD125.5 billion, or 40.3% of total Internal Public Debt. In 2014, a total of seven auctions of long-term bonds were held.

T-bills are fixed rate, dram-denominated obligations with a maturity of up to one year. Between 2010 and 2014, T-bills have comprised a declining share of Internal Public Debt. As of 31 December 2010, outstanding T-bills amounted to AMD51.4 billion, or 28.0% of Internal Public Debt. As of 31 December 2014, the outstanding amount of T-bills was AMD12.5 billion, or 4.0% of total Internal Public Debt. In 2014, a total of 36 T-bill auctions took place. In an effort to promote liquidity in the market, including treasury bill auctions, the Ministry of Finance is carrying out an AMD25 billion programme in February-March 2015, whereby it purchases medium- and long-term government securities (with maturities of 3, 5, 10 and 20 years) from market participants, which funds are then used to purchase treasury bills (with maturities of 3, 6, 9 or 12 months) at auction.

In February 2014, in an effort to increase domestic investor access to foreign-currency denominated Government securities, the 2013 Eurobonds were made available for trading on NASDAQ-OMX Armenia, the country’s domestic securities exchange. As a result, domestic holdings of Eurobonds increased, reaching AMD19.4 billion, or 6.2% of Internal Public Debt, as of 31 December 2014.

The Government also issues savings bonds, which are fixed rate, non-tradable securities sold only to individual retail investors. Coupon payments for savings bonds can be made on a quarterly, semiannual or annual basis, and the maturity period for savings bonds range from three months to 25 years. As of 31 December 2014, the outstanding amount of savings bonds was AMD0.8 billion, or 0.3% of total Internal Public Debt.

As of 31 December 2014, the weighted average yield of domestic Government securities was 13.49%, and the average contractual maturity of domestic Government securities equalled 2,003 days. All Government securities carry fixed interest rates.

In 2014, turnover on the secondary market for domestic Government securities equalled AMD143.3 billion, consisting of AMD110.3 billion in interbank transactions, AMD32.2 billion in transactions on NASDAQ-OMX Armenia and AMD0.8 billion in CBA transactions.

Turnover on the secondary market is expected to increase after the pension reform came into force in January 2014. Under the pension reform, workers aged 40 or below no longer make contributions to the state pension fund directly, instead making payments into their own private pension accounts. The Government matches workers’ contributions to their private pension accounts subject to a cap. See “Economy of Armenia—Labour and Social Policy—Social Insurance System—Pensions and Disability.” The pension reform is expected to contribute to the development of Armenia’s domestic capital markets.

Commercial loans, which currently comprise one loan extended by a domestic bank to the Ministry of Finance, have over time represented a decreasing share of Internal Public Debt. As of 31 December 2010, the outstanding commercial loan amounted AMD7.3 billion, or 4.0% of total Internal Public Debt. As of 31 December 2014, the outstanding commercial loan equalled AMD1.9 billion, or 0.6% of total Internal Public Debt.

External Public Debt

According to the Law on State Debt, External Public Debt consists of (i) debt incurred or guaranteed by the Ministry of Finance on behalf of Armenia and held by non-residents of Armenia; and (ii) debt incurred or guaranteed by the CBA and held by non-residents of Armenia (the “External Public Debt”). External guarantees issued by the Government are provided to the CBA and, to avoid double counting, are included in the External Public Debt of the CBA and not the Government.

The outstanding External Public Debt was U.S.$3,785.2 million as of 31 December 2014. As of 31 December 2014, External Public Debt was comprised of (i) debt to multilateral financial institutions of U.S.$2,604.6 million; (ii) bonds purchased by non-residents of U.S.$660.2 million, nearly all of which comprises outstanding Eurobond debt; (iii) bilateral debt to other sovereigns of U.S.$504.2 million; and (iv) indebtedness to commercial banks of U.S.$16.3 million, consisting of U.S.$9.8 million to Raiffeisen Bank International (Austria), U.S.$5.8 million to KBC BANK NV (Belgium) and U.S.$0.7 million to Erste Bank (Austria).

Historically, most External Public Debt was raised on concessionary terms, although the share of External Public Debt raised on commercial terms has risen in recent years, particularly as a result of the September 2013 Eurobond issuance. As of 31 December 2014, approximately 52% of External Public Debt was extended on concessionary terms and 48% on commercial terms. In September 2013, the Ministry of Finance on behalf of the Republic of Armenia issued the 2013 Eurobond, the country’s debut Eurobond issuance. One of the main purposes of the 2013 Eurobond issuance was to promote the country’s transition from raising debt on concessionary terms to that raised on commercial terms.

As of 31 December 2014, the average weighted interest rate on External Public Debt was approximately 1.9% per annum, and the average contractual maturity was approximately 10.2 years. As of 31 December 2014, approximately 81.2% of Armenia’s External Public Debt portfolio carried fixed interest rates, and the remainder carried floating rates. In 2014, approximately 21% of the incurred External Public Debt was used for on-lending activities to small and medium enterprises.

The following table sets forth information on External Public Debt as of the indicated dates:

Notes:

(1) Figures for External Public Debt are converted into drams, using the AMD/U.S.$ exchange rate as of the end of each period. See “Exchange Rates.”

(2) As set forth in the relevant annual Budget Message.
(3) As published by the CBA. See “Exchange Rates.”

Source: Ministry of Finance.

Of the U.S.$3,785.2 million outstanding as of 31 December 2014, U.S.$3,345.3 million represented External Public Debt incurred by the Government, including U.S.$2,257.6 million in loans from multilateral creditors, U.S.$659.2 million in Eurobonds, U.S.$411.2 million in loans from bilateral sovereign creditors, U.S.$16.3 million in loans from commercial banks and U.S.$0.9 million in dram-denominated Government securities held by non-residents. As of 31 December 2014, Armenia’s largest multilateral lenders were the IDA, IBRD, ADB and the IMF.

Japan, followed by Germany, were Armenia’s largest bilateral sovereign creditors as of 31 December 2014. Bilateral sovereign debt decreased substantially following repayment in the fourth quarter of 2013 of the U.S.$500 million loan granted by Russia in 2009, falling from U.S.$1,004.9 million as of 31 December 2012 to U.S.$454.7 million as of 31 December 2013. The 2009 Russia loan was granted to Armenia in order to alleviate the impact of the 2008-2009 global financial crisis on the Armenian economy.

In February 2015, Russia agreed to provide a U.S.$270 million financing (and also a U.S.$30 million grant to support safety upgrades) to extend the operating lifetime of the Metsamor Plant to 2026. Proceeds of the loan are to be used to finance certain reconstruction projects at the plant (including building a new unit that would replace the old part of the Metsamor Plant); preparatory work to determine the details of such projects is expected to be carried out in 2015-19. The loan bears an interest rate of 3% per annum; the first payment of principal is due on 15 January 2020.