TOPIC OF THE WEEK: Who Buys the Bonds? Armenia and Georgia’s 2027 Funding Test
Armenia and Georgia have now both entered the formal 2027 budget cycle. Armenia’s government submitted its 2027 budget proposal on October 1, which came only a day after Georgia’s government had presented its own 2027 budget package together with a document titled “Basic Data and Directions” for the period of 2027-2030. This provides for a direct comparison of how the two governments will fund their 2027 budgets, and an opportunity to assess the implications for the bonds that will be issued.
Georgia will need to meet larger net bond supply, but its recent inclusion in JPMorgan’s GBI-EM Edge index could attract extra foreign buyers and ease the burden on local investors. Armenia’s planned fiscal consolidation implies lower net issuance, although refinancing needs remain a risk that needs to be monitored.
The key takeaway is that the 2027 funding looks manageable in both countries, although the nature of the risks differ. Net domestic issuance is similar, at around 2% of GDP, although Georgia is asking its local bond market to absorb a larger share relative to the existing Treasury stock—about 20.3% versus 9.6% in the case Armenia. Armenia, in turn, faces the heavier refinancing burden. I use local-currency deposit growth to calculate a reasonable absorption cushion in both markets, with planned net issuance equal to roughly 23% of the latest annual increase in deposits (in both economies).
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