Sovereign Debt: Implications for Growth Case Study for Armenia

Abstract

Reviewing the existing literature and the recent changes in public debt economics,
this research aimed to answer two important questions for the Armenian economy.
The first challenge was to find the level of external debt to GDP ratio after which
borrowing has negative effect on the GDP per capita growth and according to
the estimations the debt overhang level appears at the debt to GDP ratio level of
34.5%. At second, this work reveals the efficient ways of using the government
borrowings. Succeeding in the second task as well the estimations suggest that the
most effective investments are in the reforms in educational and health systems.
Relying on the findings, corresponding suggestions are made for managing the public debt.