Economic growth in the US may strengthen the dollar and leave countries with a large dollar debt worse off, Mr Maurice Obstfeld, IMF chief economist, told the media Tuesday, commenting on the update of the Fund’s World Economic Outlook.
One of the scenarios under consideration is the overhaul of the US taxation rules, aiming at capturing overseas corporate profits under the taxation net, which could repatriate them back home and spur growth. This may be coupled with tax slashes as large as 1% of GDP in 2018-19.
Strengthening US economy, and dollar, could affect emerging countries with high debt in dollars, leaving them to face currency mismatches.
However, Obstfeld remarked, that if those policies don’t materialize as expected, projections would be reviewed.
“[The US Secretary of Treasury] Steven Mnuchin suggested those moves may take longer than expected. So we will come with another assessment in July”, Obstfeld said.
Above 2/3’s (68.2%) of Armenian government external debt are denominated in US dollars and SDR’s (unit of account for World Bank and the IMF). A high repayment tide is due in 2020, when Armenian first USD-denominated sovereign bonds will mature. Part of the payables may be covered by a new emission (a move already employed in 2015, with part of the 2nd emission channeled to cover the 1st).
Total government debt of the country is targeted to reach around $6.34 billion (56.8% GDP) at the end of 2017, according to earliest policy statements of the Ministry of Finance. The Government had planned to run up extra $2 billion by 2021-22, but these plans were later aborted to preserve fiscal stability.