On January 20, 2019, Prime Minister Nikol Pashinyan made a publication on his Facebook page, according to which foreign investments increased by 50% in the third quarter of 2018 compared to the same period last year. He made the same statement in an interview with RBK TV on January 29.
We tried to find out which article of the Central Bank (CB) payment balance for 2018 Pashinyan had a reference. In response to our inquiry, the Government answered that the Prime Minister referred to the 50% increase mentioned in the article “Net Liabilities”.
“Net liability” is one of the articles in the “direct investment” line of payment balance, which indicates how much commitment the government or Central Bank has undertaken to the investors. Therefore, it does not reflect the true image of all investments.
In practice, to assess the effectiveness of investment, it is necessary not only to look at the inflow, but also the net flow, that is, the difference between inflow and outflow, reflected in the line of “direct investments” and which has been negative for a long time. Consequently, the outflow of the financial resources from our country exceed the inflow of the financial resources.
At the same time, it should be noted only a small number of funds considered net liability may be directed to the real sector of the economy and create real value. The net liability should be considered mainly in the context of debt. In this case, presenting the increase of the liability as an investment is neither substantiated nor justified.
In addition, investments can be direct, portfolio and other investments (including loans and borrowings; amounts to be paid / received for goods and services; received / issued advances). These three types together form “total investments.”
It should also be taken into consideration that in economics it is accepted to compare the investments by annual principle instead of quarterly.
It should be noted that Lena Nazaryan, Deputy Speaker of the National Assembly, has also made the same statement about the growth of investments.