Foreign Loans to Armenia Reach $790 Million

Amidst predictions that Armenia's economy may shrink by as much as 20 percent, Yerevan has received an $80 million pledge of assistance from the Asian Development Bank.

With the loan, Armenia will have received $790 million in economic support from international donors, the government announced on July 7.

Finance Minister Tigran Davtian told A1plus news service that part of the cash will be used to cover an unprecedented 7.5 percent state budget deficit. "[Loans] will provide serious guarantees that we will fulfill all the obligations assumed in the state budget for this year," Davtian was quoted by A1plus as saying.

The International Monetary Fund, the World Bank, Asian Development Bank and Russia have all rushed emergency aid to Armenia. The country is increasingly hamstrung by sharply reduced economic activity, a drop in foreign remittances and a credit crunch. A large part of the loans will be used to resuscitate economic activity.

Davtian did not elaborate about how the loans will boost economic growth. Davtian said that interest rates on the loans are very low, but added that Armenia is likely to be saddled with heavy foreign debt for up to 40 years.