YEREVAN (RFE/RL)–The agreement was signed by the foreign ministers of the two states after talks held in Moscow. Russia’s Alexei Kudrin told journalists afterwards that the loan will be repayable in 15 years and carry an interest rate of about 4 percent.
His Armenian counterpart, Tigran Davtian, said these terms are beneficial for Yerevan. The deal, reportedly finalized by the two governments in early February, testifies to “the high level of bilateral strategic partnership,” he said.
Davtian did not specify just how Armenia will use the Russian credit equivalent to one fifth of its projected state budget for 2009. The Armenian government has been struggling to meet its budgetary targets and may well revise them downwards later this year. It also needs external assistance to prevent a further sharp depreciation of the national currency, the dram.
The World Bank and the International Monetary pledged earlier this year to allocate a total of over $1 billion in anti-crisis loans to Armenia in the coming years. Some of these loans worth roughly $320 million have already been disbursed.
In a February statement, Armenia’s Finance Ministry said that the loan deal with Russia will not place any “non-financial obligations” on the Armenian side. It was an apparent assurance that the government will not repay the loan with more industrial assets.
The important point will be for civic organizations to follow up and MONITOR the usage of this loan (in addition to the $1 billion promised by the U.S. via World Bank and IMF).
Loans are great if they are used for the right purpose; but I am skeptical that small businesses in Armenia will see much (if any) money in favorable loans to them. In all likelihood, these loans for the most part (95%) will go to large businesses as “gifts” as has happened in the past with the privatization of the Sevan Hydro Cascade — a series of plants worth over $200 million and privatized for $25 million along with a later government “gift” of $30 million.
Who will place a check on the Armenian government? Certainly the lenders do not care how the money is spent, as long as they get either of two things: (1) their loan installment fees, or (2) leverage in the country’s affairs.
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