#1November 2021 THE GOVERNMENT OF THE REPUBLIC OF ARMENIA INVESTOR PRESENTATION#2TABLE OF CONTENTS 1 Armenia at a Glance 2 Covid-19 Response 3 Resilient and Diversified Economy 4 Prudent Fiscal Management 5 Government Debt Management 6 Improving External Position 7 Credible Monetary Policy & Stable Financial Sector Contacts and Useful links 3 6 9 14 18 25 8 1 2 3 29 33#3DISCLAIMER 2 THIS PRESENTATION HAS BEEN PREPARED BY THE REPUBLIC OF ARMENIA ("ARMENIA") SOLELY FOR INFORMATION PURPOSES AND DOES NOT CONSTITUTE A RECOMMENDATION REGARDING THE SECURITIES OF ARMENIA. NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR CORRECTNESS OF THE INFORMATION OR ANY OPINION CONTAINED HEREIN. THE INFORMATION CONTAINED IN THIS PRESENTATION SHOULD BE CONSIDERED IN THE CONTEXT OF THE CIRCUMSTANCES PREVAILING AT THE TIME AND WILL NOT BE UPDATED TO REFLECT MATERIAL DEVELOPMENTS THAT MAY OCCUR AFTER THE DATE OF THE PRESENTATION. NEITHER ARMENIA NOR ANY OF ITS AFFILIATES, AGENTS, EMPLOYEES OR OFFICIALS SHALL HAVE ANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS ARISING FROM ANY USE OF THIS PRESENTATION OR ITS CONTENTS OR OTHERWISE ARISING IN CONNECTION WITH THIS PRESENTATION. THIS PRESENTATION INCLUDES CERTAIN FORECASTS. THESE ARE OFFICIAL FORECASTS OF THE MINISTRY OF FINANCE OF THE REPUBLIC OF ARMENIA, HOWEVER, THEY ARE BASED ON A NUMBER OF ASSUMPTIONS. SUCH ASSUMPTIONS MAY NOT PROVE TO BE CORRECT, AND SUCH FORECASTS WILL BE SUBJECT TO CONSTANT REVIEW AND MAY FROM TIME TO TIME BE REVISED BASED ON THE MACROECONOMIC AND OTHER CONDITIONS PREVAILING AT THE TIME. THERE CAN THEREFORE BE NO ASSURANCE THAT ANY FORECASTS WILL BE CORRECT OR REALIZED.#4THE GOVERNMENT OF THE REPUBLIC OF ARMENIA INVESTOR PRESENTATION 1 | ARMENIA AT A GLANCE wwwwww 686667#5COUNTRY OVERVIEW FORMAT OF GOVERNMENT Parliamentary Republic CAPITAL Yerevan TERRITORY 29,743 km² DIASPORA 8 million worldwide HEAD OF STATE President DECLARATION OF INDEPENDENCE September 21, 1991 POPULATION 2.96 million (as of January 1, 2021) VIRTUE NOMINAL GDP US$ 12.6 billion (2020) US$ 13.9 billion (2021*) REAL GDP GROWTH -7.4% (2020) 6.5% (2021*) CPI INFLATION 3.7% (2020) 7.4% (2021*) UNEMPLOYMENT 18.2% (2020) * 2022 Budget Draft Forecasts ● $ NOMINAL GDP PER CAPITA US$ 4,269 (2020) US$ 4,683 (2021*) PUBLIC DEBT / GDP 63.5% (2020) 60.8% (2021*) CURRENCY Armenian Dram (AMD) SOVEREIGN RATING Moody's: Ba3 (Stable), S&P B+(Positive), Fitch: B+ (Stable)#6KEY INVESTMENT HIGHLIGHTS DEMONSTRATED COMMITMENT TO REFORMS GROWTH SUPPORTED BY PRUDENT MACROECONOMIC POLICY FRAMEWORK FISCAL CONSOLIDATION AND PROACTIVE DEBT MANAGEMENT PROACTIVE GOVERNMENT MEASURES TO CONTAIN COVID-19 STRONG AND MULTI-FACETED SUPPORT FROM DEVELOPMENT PARTNERS The Government continues to pursue structural reforms with renewed emphasis on productivity, inclusiveness and governance as well as anticorruption and judicial systems Anchoring fiscal policy to maintain debt sustainability, and creating space for social and capital infrastructure spending Implementing the large-scale Programme for Legal and Judicial Reforms for 2019-2023, which includes addressing corruption, assuring the independence of the judiciary and improving the training of the judges Successful macroeconomic policies and structural reforms have buoyed Armenia's growth potential Armenia has a robust medium-term growth outlook, underpinned primarily by services (e.g. finance, ICT, tourism) and industry (e.g. manufacturing, mining) The short and medium-term fiscal policy is targeting full and broad based recovery of Armenian economy and boosted growth potential with significantly larger public investments in physical infrastructure and human capital. Fiscal consolidationin based on newly adopted fiscal rules during 2018-2019 driven by both revenue mobilization and spending optimization has created fiscal buffers, which supported to effective counter-cyclical fiscal policy reaction during COVID- 19 and war shocks of 2020, which the Armenian economy has faced. Fiscal policy is targeting also strengthened fiscal sustainability with reduction of public debt in line with the fiscal rule, and thus achieving growth-friendly fiscal consolidation as a result. The government has taken proactive fiscal measures amounting to 2.7% of 2020 GDP that were well-targeted at the most impacted sectors and segments of the population in order to cushion the impact of the Covid-19 shock Since 2017, Armenia has progressively consolidated its relationship and cooperation with the European Union ("EU"), resulting in the alignment of several standards, technical assistance and preferential trade access for 90% of Armenia's exports to the EU Armenia also benefits from an IMF Standby Agreement facility aimed at supporting Armenian authorities in strengthening economic fundamentals and policy frameworks Armenia also benefits from strong international partnerships with the World Bank, Asian Development Bank, KfW and the United States Agency for International Development 5#7THE GOVERNMENT OF THE REPUBLIC OF ARMENIA INVESTOR PRESENTATION 2 COVID-19 RESPONSE#8RESPONSE TO COVID-19 ECONOMIC AND SOCIAL SUPPORT MEASURES • Supporting liquidity provision to businesses - Loans to SMEs in certain affected sectors, to finance employee-related expenses, tax, duties and mandatory payments, purchase of raw materials or equipment, utility services payments Interest rate subsidies for agricultural loans/lease and co-financing Interest rate subsidies for loans that finance employee-related expenses, tax, duties and mandatory payments, purchase of raw materials or equipment, utility services payments, food ■ Eligible loans (up to AMD 500 million) Eligible co-financing/refinancing (up to AMD 250 million) ■ Maturity: 2 years with a 1 year grace Lump sum financing aimed at preserving jobs for businesses with 2-50 employees (approximately one-fifth of total employee's wages) • Direct social assistance transfers to the vulnerable Lump-sum transfers to the vulnerable, including: Families with children under 14 and children under 18: AMD 100,000 and AMD 26,500 per child, respectively ■ Micro-enterprises: 10% of the turnover in the first 3 months of 2020 or up to AMD 136,000 • ■ or AMD 68,000 if not activating cash-register machine with State Revenue Committee IT businesses: (1) grants for innovation - up to AMD 10 million per project, (2) grants for sustainable companies - up to AMD 20 million per project, (3) 100% co-financing grants not exceeding AMD 30 million Individuals made redundant due to Covid-19: AMD 68,000 Pregnant women who faced difficulties due to Covid-19: AMD 100,000 Tuition subsidies and subsidizing student loans Subsidies for utility services (gas and electricity) • Investments to support post crisis recovery From USD 0.5 million to USD 4.0 million of equity per project in sectors of strategic importance (via Entrepreneur + State Anti-Crisis Investments Fund) Corporate Income Tax Reform Government has implemented a deferral in corporate income tax advance payment for the second quarter of 2020 and, also allowed the CIT payers to choose an alternative method of calculating the tax advance payment, based on the turnover over the previous quarter. Fiscal Response to COVID-19 Crisis, AMD bln Measures in 2020 2.7% of GDP in total 70.0 19.4 13.0 26.0 36.4 Measures in Jan-Aug 2021 0.3% of GDP* in total 13.1 ■ Economic measures ■Social measures ■ Health-care measures ■Lending operations (Below the line measures) ■CIT Reform * Calculated using projected GDP of 2021, based on 2022 Budget Draft Forecasts 5.9 7#9RESPONSE TO COVID-19 MONETARY RESPONSE • The Central Bank of Armenia reduced the policy rate by 125 bps since March to 4.25% on September 15, 2020 and has since increased the policy rate by 100bps on December 15, 2020 to 5.25%, and a cumulative 200 bps as of September 14, 2021 to 7.25%. • FX swaps were used to support FX liquidity in the market • Free-floating exchange rate allowed orderly adjustment of the exchange rate: AMD depreciated by around 12% against the USD and then appreciated somewhat settling at 4%, a depreciated level compared to the pre-pandemic level • The CBA has enhanced engagement between banks and supervisors to continuously assess the impact of the crisis on asset quality, capital, and liquidity INTERNATIONAL FINANCIAL AID • In May 2020, the IMF added SDR 128.8 million to its Stand-by Facility for Armenia, and immediately took SDR 206.0 million thereunder as direct budget support. A further disbursement of SDR 25.7 million was drawn in December 2020 • In November-December 2020, under European Union's EUR 92 million response package to the COVID-19 pandemic in Armenia, EUR 35.63 million was allocated as fixed tranche under the ongoing 4 budget support programs, repurposed for that aim, as well as EUR 24 million and EUR 9 million were allocated respectively in the framework of the signed Financing Agreements "COVID-19 Resilience Contract for Armenia" (EUR 30 million) and "Support to Justice Sector Reforms in Armenia: Phase I" (EUR 30 million) (entered into force on October 9, 2020) • Under the Grant Agreement signed with ADB on August 27, 2020 ADB's Asia Pacific Disaster Response Fund (APDRF) provided USD2 million to Armenia in December 2020 to support Armenia in mitigating the negative consequences COVID-19 • On June 30, 2020 Exchange of Notes was signed between the RA Government and the Government of Japan, pursuant to which, for the purpose of contributing to the implementation of the Economic and Social Development Programme, the Government of Japan shall extend to Armenia a grant of JPY 400 million In the scope of fight against COVID-19, Armenia has received aid from various international organizations and foreign states, including UN (UNICEF, UNFPA, WFP), ICRC, WHO, IAEA, USA, Russian Federation, China, Southern Korea and European countries. 8#10THE GOVERNMENT OF THE REPUBLIC OF ARMENIA INVESTOR PRESENTATION 3 | RESILIENT AND DIVERSIFIED ECONOMY#11ECONOMIC INDICATORS IN 2020 ARMENIA EXPERIENCED TWO UNPRECEDENTED SHOCKS (COVID-19 AND NAGORNO-KARABAKH WAR), HOWEVER UNDER PRUDEN MACROECONOMIC (FISCAL AND MONETARY) MANAGEMENT THE MACROECONOMIC STABILITY WAS PRESERVED. THE ECONOMY HAS ENTERED A PHASE OF BROAD-BASED RECOVERY IN 2021 AND IN THE FIRST HALF OF THE YEAR IT WAS MAINLY DRIVEN BY SERVICES AND DOMESTIC DEMAND. REAL GDP: CONTRIBUTION OF SUPPLY COMPONENTS REAL GDP: CONTRIBUTION OF EXPENDITURE COMPONENTS (Real growth (%) and contribution to growth (percentage point)) 10.0 8.0 (Real growth (%) and contribution to growth (percentage point)) 7.5 7.6 5.2 6.0 4.0 3.2 2.0 0.0 -2.0 2015 2016 2017 2018 2019 -4.0 -6.0 -8.0 -10.0 Industry Agriculture 10.0 7.5 6 5.0 5.0 5.0 0.0 2015 2016 2017 2018 2019 2020 2021-H1 -5.0 2021 H-1 7.4 -10.0 -7.4 -15.0 Construction Services Net taxes GDP Source: Armstat, Calculations of the Ministry of Finance Consumption *Gross fixed capital formation Source: Armstat, Calculations of the Ministry of Finance Investement* Net Export GDP ECONOMIC ACTIVITY INDICATOR (Real growth (%) and contributions to growth (percentage point)) GROSS FIXED CAPITAL FORMATION 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 ooooooo 5.0 5.2 4.3 4.7 12 (Real growth (%)) 9.7 14.4 10 9.5 8 6 4 2.5 4.4 4.8 January January February March3.5 January January January - January - April May June January - January - January - July August September 2 0 -2 2015 2016 2017 2018 2019 2020 2021 - H1 -4 -8.0 .3 -6 -8.5 -10.0 -8 -8.6 Industry Services Economic activity indicator *Gross output of agriculture is published quarterly. Source: Armstat, Calculations of the Ministry of Finance Agriculture* Trade Construction Other -10 -12 -11.4 -14 Source: Armstat 10#12ECONOMIC INDICATORS IN LINE WITH THE GOVERNMENT TARGETS THE GROWTH IS EXPECTED TO ACCELERATE AND WILL BE DRIVEN BY INCREASED PUBLIC INFRASTRUCTURE INVESTMENTS AND ENHANCED PRIVATE INVESTMENTS AND EXPORTS. ECONOMIC DIVERSIFICATION TOWARDS HIGHER VALUE ADDED ACTIVITIES WILL CONTINUE. GDP TREND NOMINAL GDP PER CAPITA 7.5% 7.6% 6.5% 7.0% 5.2% 5,148 3.2% 4,597 4,683 0.2% 4,196 4,269 15.3 3,869 13.6 13.9 3,512 3,524 12.5 12.6 11.5 10.6 10.5 (7.4%) 2015 2016 2017 2015 2016 2017 2018 2019 2020 2021* 2022* 2018 ■■GDP per Capita (US$) 2019 2020 2021* 2022* Nominal GDP (US$ bln) Real GDP Growth (%) Source: Armstat * 2022 Budget Draft Forecasts GOODS AND SERVICES EXPORT TREND 23.7% 13.6% 15.7% 12.1% 5.7 4.9 (5.5%) 4.4 3.6 3.1 20.2% 16.6% Source: Armstat * 2022 Budget Draft Forecasts DIVERSIFICATION INTO HIGHER VALUE ADDED ACTIVITIES (% Share in Real GDP) 10.0 9.7 9.9 10.2 10.2 9.9 9.9 9.9 5.3 44.3 45.7 47.2 49.2 50.4 49.1 49.8 49.3 4.5 3.8 9.0 7.8 7.5 7.2 7.1 7.1 6.8 7.5 20.7 19.7 17.4 15.5 13.6 14.0 13.9 13.5 (34.2%) 16.0 17.2 18.0 18.0 18.8 19.9 19.5 19.7 2015 2016 2017 2018 2019 2020 2021* 2022* 2015 2016 2017 2018 2019 2020 2021* 2022* Exports (US$ bln) Export Growth (%) ■Services ■Construction ■Agriculture ■Industry Source; Armstat *2022 Budget Draft Forecasts 11 ■Taxes less subsidies on products Source: Armstat, Calculations of the Ministry of Finance *2022 Budget Draft Forecasts#13KEY SECTORS WELL DIVERSIFIED ECONOMY, SHIFTING TOWARDS HIGHER VALUE ACTIVITIES AGRICULTURE . Over 68% of Armenia's land area is classified as agricultural land, half of which comprises of pasture . In December 2019, the Government approved the 2020- 2030 strategy to develop the agricultural sector, with the key objectives: - Ensure prosperity and inclusive growth in rural areas Improve national food and nutrition security Promote the export of high-value agricultural products Enable best-in-class food safety systems Lead on technology-driven agricultural innovation across the region INDUSTRY • Armenia's mining industry accounted for 3.8% of Armenian GDP in 2020. Main activity is focused on metal ores, in particular molybdenum, copper and zinc In 2020, manufacturing accounted for 12.4% of nominal GDP. The main manufacturing areas in Armenia are food, beverage and tobacco products as well as basic metals and non-metallic mineral production, such as rubber and plastics and other non-metallic goods 14% 20% ☑ Share in Real GDP by Economic Activity, as of end of 2020 TAXES* 10% Source: Armstat. *Taxes less subsidies on products ** Growth rates are presented in nominal terms 12 7% * • • CONSTRUCTION Armenia's construction sector experienced strong growth as soviet-era housing and office buildings were replaced with more modern structures, growing 3.8% in 2020**. These developments continue throughout 2021 (18.1% in H1), The largest public construction projects include the new terminal at Zvartnots Airport, and the Northern Avenue, which runs through the center of Yerevan The ongoing North-South Highway, is a major infrastructure project which will span the country 49% SERVICES • ICT has been designated by the Government as a priority sector for investment and development. The number of companies operating in this sector has increased significantly over the past 10 years • Over the past 10 years Armenia's financial services sector share has increased significantly on the back of an increase in loans (reaching to 6.7% in 2020). The rise in loans reflects, in turn, increased access to and demand for funding, greater competition among banks and higher volumes of foreign investment in the sector#14THE ECONOMIC TARGETS OF THE GOVERNMENT PROGRAM 2021-2026 13 The Government of Armenia has set the following targets for 2021-2026 ✓ At least 7% annual average GDP growth (with favorable external conditions to be targeted at 9%) ✓ 25% formal private sector labor income share in GDP ✓ Less than 10% unemployment rate ✓ At least 5% annual growth of total factor productivity ✓ At least 25% Investment share in GDP ✓ Reaching 6% of foreign direct investment share in GDP ✓ At least 15% share of manufacturing in GDP#15THE GOVERNMENT OF THE REPUBLIC OF ARMENIA INVESTOR PRESENTATION 4 PRUDENT FISCAL MANAGEMENT#16FISCAL RULE REFORM UPGRADED FISCAL RULES SUPPORT DEBT SUSTAINABILITY AND FISCAL SPACE ACTIVE FISCAL POLICY PRIORITIES 15 Enhanced flexibility for reacting to shocks FISCAL RULE WHO State budget deficit should not be greater than capital expenditures Growth rate of current primary expenditures is capped by average nominal GDP growth of previous 7 years ■The Government should introduce debt reduction program in Medium Term Expenditures Framework A 02 Boosting capital expenditures and long term growth Built-in stabilizer of the economic cycle 03 '04 Enhanced government accountability ≥40% ≥50% Debt Burden ≥60% Growth rate of current primary expenditures is capped by average nominal GDP growth of previous 7 years reduced by 0.5% Current expenditures are capped by volume of taxes ■ The Government should submit debt reduction program to the Parliament Due to the extraordinary circumstances linked to the global pandemic, the Fiscal Rule has not been applied in 2020 and 2021. The Government remains committed to reducing the Government Debt-to-GDP ratio from 2021 and bringing this ratio below the respective target in the medium-term in line with the fiscal rule#17GROWTH-FRIENDLY FISCAL POLICY IS ON TRACK PRUDENT FISCAL FRAMEWORK SUPPORTIVE FOR RECOVERY AND ECONOMIC POTENTIAL - IN LINE WITH THE FISCAL RULE THE GOVERNMENT IS COMMITED TO IMPLEMENT FISCAL POLICY IN GOVERNMENT DEBT TO GDP RATIO PROJECTION LINE WITH THE "GOLDEN RULE" OF PUBLIC FINANCES 6.0 5.5 4.8 4.3 5.0 4.0 3.0 2.0 1.0 3.3 2.5 5.4 3.7 2.9 63.5 65 5000.0 60.8 60.2 4500.0 4.7 3.2 3.1 60 4.5 53.7 55 51.9 51.2 4000.0 49.9 3500.0 50 3000.0 45 2500.0 40 2000.0 2016 2017 2018 2019 2020 2021 2022 2021* 2022* bashki .t|| 0.0 2016 2017 1.8 1.0 2018 2019 State Budget Overall Deficit 2020 State Budget Capital Expenditures Source: Ministry of Finance, 2021 and 2022 are projections based on 2022 Budget Draft CONCERTED GOVERNMENT REVENUE MOBILIZATION 30.6 27.9 28.6 27.0 23.2 23.1 24.0 24.9 25.2 23.9 22.2 22.3 2015 2016 2017 2018 2019 2020 Source: Ministry of Finance Government debt, bln AMD (rhs) O Government debt to GDP (2022 State Budget), % 60% threshold 50% threshold MORE EMPHASIS ON ENHANCING CAPEX TO ACHIEVE HIGHER GROWTH With 2022 State budget Draft, Government plans to increase the role of capital spending even more than it was planned in 2022-2024 MTEF State Budget Share in GDP, % 2021 2022 28.2 27.8 24.7 23.6 State Budget Revenues 23.6 24.7 Tax Revenues 22.5 23.4 State Budget Expenditures 28.2 27.8 Current Expenditures 25.1 23.4 Transactions with non-financial assets 3.2 4.4 2021 2022 State Budget Balance -4.7 -3.1 Government Debt 60.8 60.2 ■State Budget Revenues (% of GDP) ■State Budget Expenditures (% of GDP) Source: Ministry of Finance, 2021 and 2022 are projections based on 2022 Budget Draft 16 Source: Ministry of Finance, 2022 Budget Draft#18TAX REVENUES TAX REVENUES ARE RECOVERING FAST IN 2021 AND ARE EXPECTED TO SIGNIFICANTLY IMPROVE THE RATIO IN GDP IN 2022 TAX REVENUES, YOY % CHANGE 50.0 40.0 • In line with economic recovery tax revenues are increasing with a high growth rates, after decline in 2020 due to economic crisis. 44.0 30.0 20.0 23.1 10.3 10.5 10.9 11.9 7.3 5.9 • The increase of tax revenues is mainly driven by VAT, Custom Duties and Other tax revenues. 10.0 16.5 0.0 2.2 2.4 -10.0 -4.6 -4.6 -5.1 -5.3 -5.8 -5.2 -5.3 -5.4 • As a result of tax policy and administration efforts tax to GDP ratio is expected to improve by 0.9 percentage points in 2022 reaching 23.4%. -8.7 -20.0 -11.0 1 2 3 4 5 6 7 8 9 10 10 11 12 TAX REVENUES GROWTH RATE (%) AND CONTRIBUTIONS OF TAX Source: Ministry of Finance TYPES (P.P.) 15.0 11.9 10.0 5.0 0.0 -5.0 -5.7 -10.0 24.0 23.5 23.0 22.5 22.0 21.5 20.9 21.0 20.5 2020 January-September 2021 January-September 20.0 19.5 2018 ■VAT Excise Profit tax Income tax Stamp Duties Custom duties Other tax revenue Tax Revenue Source: Ministry of Finance 17 2021 2020 TAX REVENUES, % OF GDP 23.4 22.4 22.4 22.5 2019 2020 2021 2022 Source: Ministry of Finance, 2021 and 2022 are projections based on 2022 Budget Draft#19THE GOVERNMENT OF THE REPUBLIC OF ARMENIA INVESTOR PRESENTATION 5 | GOVERNMENT DEBT MANAGEMENT#20GOVERNMENT DEBT MANAGEMENT GOVERNMENT DEBT TO GDP GOVERNMENT DEBT BY INSTRUMENTS (% of Total Government Debt) 10.0 63.5 70.0 0.1 0.3 0.3 0.1 0.1 0.1 53.7 51.9 8.0 51.2 50.1 60.0 18.4 16.2 15.7 16.1 13.3 20.4 50.0 18.4 19.1 6.0 40.0 19.3 20.8 24.4 6.2 27.0 5.6 30.0 5.3 4.0 4.9 5.0 4.3 20.0 2.0 10.0 62.2 65.1 65.0 63.0 62.1 2.4 52.5 1.1 1.3 1.4 1.5 1.9 2016 2017 2018 2019 Government Domestic Debt (US$ bln) Government External Debt (US$ bln) 2020 Sep-21 Government Debt (% of GDP) 2016 2017 2018 2019 2020 Sep-21 GOVERNMENT DEBT CURRENCY COMPOSITION (% of Total Government Debt) 4.4 3.9 3.7 3.3 3.0 2.3 7.0 8.7 9.2 10.6 10.9 9.3 19.0 29.3 26.5 24.1 21.1 23.0 19 42.1 43.9 38.3 39.5 42.0 43.6 24.4 27.0 19.3 18.4 19.1 20.8 External Credits and Loans ■Domestic Securities in AMD Eurobonds Guarantees CONTINGENT LIABILITIES As of September 30, 2021 there were no outstanding domestic guarantees issued by the Government while amounts outstanding under External Guarantees issued by the Government totalled USD 117.4 million out of which USD 109.3 million was provided by the Government for external loans of the CBA. 2016 2017 2018 2019 2020 Sep-21 Source: Ministry of Finance ■AMD ■USD ■SDR EUR ■JPY ■AED ■CNY#21GOVERNMENT DEBT MANAGEMENT (CONT'D) EXTERNAL CREDITS AND LOANS (as of September 30, 2021) Stock Outstanding (USD mln) of which Multilateral Creditors Bilateral Creditors Commercial Banks Weighted Average Interest Rate, % Weighted Average Time to Maturity (ATM), years As of September 30, 2021 30.09.2021 US$1.06 BILLION OF UNDISBURSED BALANCE UNDER EXISTING LOANS 4,496.4 3,504.1 974.7 17.6 1.5 8.0 EXTERNAL PUBLIC LOANS STRUCTURE BY CREDITORS (% of External Public Loans as of September 30, 2021) Germany-KfW 28.1% Russia 3.2% France 2.1% IBRD 13.9% IDA .0.8% EBRD 4.3% EIB .7.8% IFAD 0.001% International Development Association International Bank for Reconstruction and Development 20.7% 18.1% ADB Asian Development Bank International Monetary Fund 16.9% EDB (EFSD). 24.1% 7.6% 15.7% Eurasian Development Bank 7.2% European Investment Bank 2.9% European Union 1.7% International Fund for Agricultural Development 1.4% OPEC Fund for International Development European Bank for Reconstruction and Development 1.0% 0.5% Russian Federation 7.2% Germany (KfW) 6.0% Japan (JICA) 4.5% France 3.1% The Export-Import Bank of China 0.5% USA 0.3% Abu-Dhabi Fund for Development 0.1% Erste Bank (Austria) 0.2% Raiffeisen Bank International AG (Austria) 0.1% KBC BANK NV (Belgium) 0.1% Source: Ministry of Finance 90 0% 5% 10% 15% 20% 25% 20 20#2222 21 GOVERNMENT DEBT MANAGEMENT (CONT'D) NET FINANCING OF THE STATE BUDGET DEFICIT BY BORROWINGS CONSOLIDATED REDEMPTION AND DEBT SERVICE PROFILE (SEPT. 30, 2021) 42% 0.85 16% 36% 44% 85% 0.97 32% 1,400 1,200 0.73 1,000 0.58 800 0.49 600 400 0.28 200 58% 2016 84% 2017 64% 56% 2018 2019 15% 2020 68% Sep-21 External Net Borrowings (% of Total Borrowings) Total Net Borrowings (US$ bln) Domestic Net Borrowings (% of Total Borrowings) the amounts of net borrowings have been converted into US$ based on the USD/AMD average exchange rate for the period GOVERNMENT DEBT SERVICING COSTS 2021 2023 2025 2027 2029 2031 2033 2035 Amortization payments, USD mln 2037 2039 2041 2043 ......... 2005 2007 2009 2051 2053 ■Interest payments, USD mln REDEMPTION PROFILE OF GOVERNMENT DEBT (SEPT. 30, 2021) 1,200 1,000 4.9% 4.9% 5.0% 4.8% 4.3% 4.4% 800 2.7% 2.2% 2.3% 2.4% 1.9% 2016 2017 2018 Interest Payments on Government Debt (% of GDP) 2019 2020 Sep-21 Weighted Average Interest Rate (%) 600 400 200 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 ■Eurobonds, USD mln ■Gov. Securities Denominated in AMD, USD mln 2045 2047 2049 2051 2053 External Loans, USD min ■Guarantees, USD mln Source: Ministry of Finance#23GOVERNMENT DEBT MANAGEMENT (CONT'D) OUTSTANDING GOVERNMENT DOMESTIC SECURITIES YIELD CURVE OF DOMESTIC SECURITIES Stock outstanding, AMD bln Weighted Average Yield, % Weighted Average Time to Maturity, days Type of Security T-bills Medium-Term Coupon Notes Long-Term Coupon Bonds Saving Coupon Bonds 30.09.2021 10.50 10.00 1,116.8 9.59 9.71 9.79 9.84 9.93 9.96 9.97 10.00 9.40 9.50 10.06 8.90 9.00 8.66 3,905 8.36 8.50 7.96 Average Time to 8.00 7.68 Weighted Average 7.55 Maturity, days Yield, % 7.50 143 7.12 7.00 6.50 844 7.95 6.00 5,495 11.17 1D 1M 3M 6M 9M 1Y 2Y 3Y 4Y 5Y 7Y 10Y 15Y 20Y 30Y 464 9.07 Source: CBA, as of 05.11.2021 Weighted average yield of Government Securities allocated on the Primary Market in January- September, 2021 equals to 9.08%, and weighted average time to maturity is 3,380 days. ON-THE-RUN GOVERNMENT SECURITIES: LATEST AUCTIONS STRUCTURE OF DOMESTIC SECURITIES (SEPTEMBER 30, 2021) (% of total) by Type of Security by Average Time to Maturity Saving Coupon Bonds 0.5% Auction Date ISIN Allocation Weighted Average Yield Coupon Yield Outstanding, AMD Maturity Date Long- Term 5 and 4-Oct-2021 AMGT5203A226 14-Sep-2021 AMGN36294244 10-Aug-2021 AMGN60294268 13-Jul-2021 AMGB1129A316 12-Oct-2021 AMGB3129A504 2,638,700,000 8.81% 20,400,000,000 9.35% 6.50% 20,892,000,000 9.60% 7.00% 48,160,950,000 9.91% 8.00% 12,247,051,000 10.33% 9.75% 2,638,700,000 3-Oct-2022 35,400,000,000 29-Apr-2024 35,892,000,000 29-Apr-2026 70,779,150,000 29-Oct-2031 112,653,843,000 29-Oct-2050 Coupon Bonds T-bills 4.2% more years 61.8% 66.5% Medium- Term Coupon Notes 28.9% 22 Source: Ministry of Finance up to 1 year 11.1% from 1 to 5 years 27.0%#24GOVERNMENT DEBT MANAGEMENT (CONT'D) ARMENIA IN INTERNATIONAL CAPITAL MARKETS Terms of Issuance Armenia 7.15% 2025 Armenia 3.95% 2029 The Republic of Armenia RegS/144A The Republic of Armenia RegS/144A Issuer Issuance Format Ratings ISIN Index Eligibility Issue Size Issue Date Ba3 (Moody's) / B+ (Fitch) US042207AB67/XS1207654853 IMBIG 500,000,000 USD Ba3 (Moody's) / B+ (Fitch) US042207AC41/XS2010043904 IMBIG 500,000,000 USD Armenia 3.60% 2031 The Republic of Armenia RegS/144A Ba3 (Moody's) / B+ (Fitch) US042207AD24/XS2010028939 IMBIG 750,000,000 USD 26 March of 2015 26 September of 2019 2 February, 2021 Maturity Date 26 March of 2025 26 September of 2029 Tenor Maturity Type Coupon Coupon Frequency First Coupon Payment Date Yield Benchmark Spread to benchmark Spread to mid-swap Listing Issue Price 10 years Bullet 7.15% Semi-annual 26 March and 26 September 26 September of 2015 7.50% UST due to 2025 - 2.0% +551.8 b.p. +543.7 b.p. 10 years Bullet 3.95% Semi-annual 26 March and 26 September 26 March of 2020 4.20% UST due to 2029 - 1.625% +242.8 b.p. +255 b.p. Irish Exchange Stock 97.568 Irish Exchange Stock 97.976 2 February, 2031 10 years Bullet 3.60% Semi-annual 2 February and 2 August 2 August, 2021 3.875% UST due to 2030 - 1.039% + 283.6 b.p. + 280.2 b.p. Irish Exchange Stock 97.738 On January 26, 2021, the Republic of Armenia returned to the international capital markets with a benchmark USD 750 mln 10-year 144a/RegS Eurobond offering that priced at a re-offer yield of 3.875% and a 3.600% coupon. KEY TRANSACTION ACHIEVEMENTS ✓ Largest transaction ever performed by Republic of Armenia in Eurobond market ✓ Lowest yield and coupon ever achieved by the Republic of Armenia ✓ Second lowest US$ coupon ever obtained by a sub-IG Sovereign issuer for a tenor over 5 years ✓ Significant price revision of ~50-62.5bps from IPTS, allowing Armenia to price inside its US$ fair value curve ✓ Peaking above US$ 3bn, the offering saw Armenia's largest orderbook ever, reflecting investors' confidence in the country's fundamentals 23 23#25GOVERNMENT DEBT MANAGEMENT (CONT'D) INDICATORS CHARACTERIZING GOVERNMENT DEBT AND BENCHMARKS FOR 2021-2023 24 Benchmark 4.3 31.12.2020 30.09.2021 actual actual 4.5 Weighted Average Interest Rate, % Refinancing risk Weighted Average Time to Maturity (ATM), years Debt Share Maturing in Upcoming 365 Days, % 8-11 8.8 8.6 5.8 5.7 The share of Government Treasury Securities maturing in the next year in total TS (at the end of the year), % maximum 20% 11.5 11.1 Interest rate risk The share of fixed rate debt in the total debt, % Weighted Average Time to Refixing (ATR), years Debt Share Refixing in Upcoming 365 Days, % Exchange rate risk Share of domestic debt in total debt, % at least 80% 80.4 82.6 7.1 7.4 25.7 22.5 at least 25% 25.4 27.7 Share of AMD denominated debt in total debt, % at least 25% 24.4 27.0 Abstract from Debt Strategy In the medium-term and long-term, the share of the domestic net borrowings in the State budget deficit financing will be increased along with the targeted change of the structure and composition, as well as the significant increase in the number of market participants. It will be aimed at reducing the foreign exchange rate risk, as well as will establish a background for the application of new instruments in the financial market (floating, index linked, targeted, etc.) and for the further development of the market. Driven by the progress of the pension and insurance reforms, it will be possible to speed-up the process of increasing the weight of the State budget deficit financing from the domestic sources. The increase of the liquidity of the Government treasury securities through enhancing volumes of the outstanding Government treasury securities will continue to be considered as a domestic public debt management target.#26THE GOVERNMENT OF THE REPUBLIC OF ARMENIA INVESTOR PRESENTATION 6 IMPROVING EXTERNAL POSITION#27RUSSIA Russia is Armenia's largest source of worker remittances and largest trading partner, accounting for 33.3% of the value of imports (by country of origin) and 26.5% of the value of exports for the six months ended 30 June 2021 STRONG ACCESS TO MARKETS THROUGH TRADE AGREEMENTS STRONG BILATERAL AND MULTILATERAL PARTNERSHIPS EUROPEAN UNION (EU) In 2017, Armenia and the EU concluded the CEPA which sets a framework for the cooperation between the union and the country Armenia benefits from the GSP+1 system which provides the country with facilitated access to the EU market through no tariffs for 90% of the country's exported goods valid until 2024 For the six months ended 30 June 2021, the EU accounted for 21.6% of the country's total exports and 20.4% of imports COMMONWEALTH OF INDEPENDENT STATES (CIS) In 1991, Armenia became a member of the CIS which aims to enhance political, economic, environmental, humanitarian and cultural cooperation and support the free interaction, contact and movement of citizens within the CIS Countries within the CIS region are the main trade partners of Armenia. For the six months ended 30 June 2021, import and exports from CIS countries and Georgia accounted for 47.5% and 30.8% respectively Armenia holds bilateral free trade agreements with 8 of the 11 country members Countries With Free Trade Agreements with Armenia Countries included in the GSP Agreements with Armenia The two countries have signed a free trade agreements and are both part of the CIS, the Organisation of Black Sea Economic Cooperation and the EEU CHINA Armenia and China have developed relations of friendly cooperation over the last decades The Armenian Government of Armenia's has expressed its support to China's One Belt One Road initiative and joined its Economic Belt of Silk Road component EURASIAN ECONOMIC UNION (EEU) The EEU, consisting of Russia, Belarus, Kazakhstan and the Kyrgyz Republic, includes a custom union in which no tariffs apply. Armenia joined the EEU in 2015 and is gradually transitioning into the tariff system of the union Armenia currently does not have any export restrictions in place, such as export quotas, export tariffs or voluntary export restraints Armenia has received two grants (USD42 million and RUB130 million) to support the country's integration into the EEU Note: 1. GSP+ Special Incentive Arrangement for Sustainable Development and Good Governance 26#28FOCUS ON EXPORT-ORIENTED AND COMPETITIVE INDUSTRIES SHIFT IN IMPORTS AND EXPORTS TOWARDS CAPITAL GOODS AND HIGHER VALUE EXPORTS DIVERSIFIED EXPORT BASE, SHIFTING TOWARDS HIGHER VALUE EXPORTS AND REDUCING DEPENDENCY ON COMMODITIES (% Share of Goods Exports) ■Mineral products Prepared foodstuffs 4% 2% 6% 1%6% 2% 6% Base metals 26% 6% 4% Share of textile and clothing exports up by 0.4pp Precious stones and metals 37% ■Textiles/clothing 11.0% CAGR 6% Animals and animal products ■Vegetables $1.1bln $1.9bln 21% 10% Share of base metals exports down by 0.9pp ■Instruments and devices Other 21% 12% 11% 19% Source: Armstat (% Share of Goods Imports) ■Mineral products ■Machinery and equipment Prepared foodstuffs Chemical products Base metals ■ Vegetables ■Transport ■Textiles/clothing ■ Other For the eight months ended August 31 2016 For the eight months ended August 31 2021 ARMENIA'S IMPORT COMPOSITION SHIFTING FROM CONSUMPTION TOWARDS INVESTMENT 18% 24% 18% 25% $2bln 14% 11.7% CAGR 6% $3.1 bln 16% 7% 6% 5% 4% 11% 5% 8% 7% 9% 7% 11% Source: Armstat For the eight months ended August 31 2016 For the eight months ended August 31 2021 27 Share of machinery imports up by 2.6 pp Share of prepared foodstuffs down by 2.4pp#29EXTERNAL POSITION DESPITE WEAKENING EXTERNAL POSITION AS A RESULT OF COVID-19, ARMENIA IS MAINTAINING SIGNIFICANT RESERVE ADEQUACY TREND IN CURRENT ACCOUNT (% of GDP) REMITTANCES 15% 10.7% 10.4% 10.1% 9.6% 9.2% 8.5% 8.1% 10% 5% 0% (5%) (1.0%) (2.7%) (1.5%) (3.8%) (2.2%) 1,102 1,010 1,164 1,151 1,160 1,028 580 (10%) (7.0%) (7.4%) 2015 2016 2017 2018 2019 2020 June 2021 (15%) 2015 2016 2017 2018 2019 2020 June 2021 Goods And Services Primary Income Secondary Income Current Acount Source: CBA Net Inflow of Personal Remittances by Balance of Payments (US$ min) Remittances (% of GDP) Source: CBA Net FDI* 184 334 267 253 2015 2016 2017 Source: CBA * Net incurrence of liabilities 28 2018 ■FDI Net Inflow (US$ mln) INTERNATIONAL RESERVES 5.2 5.9 4.8 4.9 4.6 4.6 4.1 3,114 2,850 2,616 2,204 2,314 2,259 1,775 110 101 47 2019 2020 June 2021 2015 2016 2017 2018 2019 I Gross Official Reserves (US$ bln) Source: CBA 2020 Import Cover (months) June 2021#30THE GOVERNMENT OF THE REPUBLIC OF ARMENIA 7 INVESTOR PRESENTATION CREDIBLE MONETARY POLICY & STABLE FINANCIAL SECTOR#3130 Objectives INSTITUTIONAL FRAMEWORK CREDIBLE INSTITUTIONAL FRAMEWORK FOR MANAGING MONETARY POLICY AND THE FINANCIAL SECTOR INSTITUTIONAL FRAMEWORK - CENTRAL BANK STRUCTURE (% of GDP) KEY CENTRAL BANK RATES AND INFLATION (%) Structure 10.0% Maintains prices and financial stability • Supervision of the banking sector and regulation of other financial services 8.0% 6.0% Holds foreign reserves and acts as the financial agent and banker for the Government 4.0% 2.0% 0.0% " The CBA is governed by a board composed of a chairman, two deputies and five members Constituted, inter alia, of a Monetary Policy Department, focused on monetary and FX policies, and a Financial Stability and Special Resolution Committee responsible for financial stability (2.0)% Oct- Dec- Feb-17 Apr-17- Jun-17- Aug-17- Oct-17- III $ Price Stability Inflation targeting policy with an annual inflation target of 4% (tolerance band of plus/minus 1.5%) Key inflation targeting instrument is the interest rate on short-term loans from the CBA to the domestic banking system (the "Refinancing Rate") EXCHANGE RATES (DRAM/EUR, DRAM/USD, end of period) NQ Financial Stability Assessed by the Financial Stability and Special Resolution Committee Oversight includes various stress-testing models, to identify potential risks and consider appropriate measures to ensure financial stability Source: CBA Refinancing Rates Dec-17- Feb-18- Apr-18- Jun-18- 8.9% 8.75% 7.25% 5.75% Aug-18- Oct-18- Dec-18 Feb-19- Apr-19- Jun-19- Aug-19- Oct-19- Dec-19- Feb-20 Apr-20- Jun-20- Aug-20- Oct-20- Dec-20- Feb-21- Apr-21- Jun-21- Aug-21- One Day Deposit Facility Rate Lombard Repo Rolling 12m Inflation Rate 580.1 553.7 537.3 528.7 512.2 641.1 522.6 484.2 483.8 483.9 484.1 483.8 479.7 2015 2016 2017 2018 2019 2020 Sep-21 --AMD/EUR AMD/USD 561.43#32Previous Projection Current Projection Actual INFLATION PROJECTION (CBA, Sept. 2021) MONETARY POLICY IS COMMITTED TO PRICE STABILITY CBA'S COMMITTED TIGHTENING OF MONETARY CONDITIONS SINCE DEC 2020 IS EFFECTIVE IN TERMS OF CONTROLLING THE OUTPACING DEMAND AND CONTAINING THE INFLATION IN FULFILLMENT OF INFLATION TARGET IN THE MEDIUM RUN 2017/01 2018/01 2017/04 2017/03 2017/02 2018/02 2018/04 2018/03 2019/01 2019/02 2019/03 2019/04 2020/01 2020/02 2020/03 CENTRAL BANK LIQUIDTY TRANSACTIONS (BLN DRAMS) 2020/04 2021/01 2021/02 2021/03 2021/04 2022/01 2022/02 2022/03 2022/04 2023/01 2023/02 2023/03 2023/04 2024/01 2024/02 6420 4 -2 A 4.0 2.0 0.0 -2.0 INFLATION COMPONENTS 10.0 12 Non-food products\ Services Non-seasonal food 10 8.0 Seasonal food 12-month inflation Core inflation 8 6.0 MARKET INTEREST RATES (%) Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 8.50 8.00 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 500000 400000 300000 200000 100000 0 -100000 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 New 10 Nov-19 Dec-19 Jan-20 Jan-20 Feb-20 Feb-20 Mar-20 Apr-20 May 20 May-20 Reverse repo Deposit auction Structural repo (91 days) FX provision swap Net liquidity oz-up OC-M Jul-20 FX attraction swap Aug-20 Aug-20 Sep-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Repo (up to 7 days) Source: CBA Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 CB refin. rate CB repo rate Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Interbank repo rate TB rate (3 months) Jun-21 Jul-21 Aug-21 Sep-21 31 Deposit Lombard repo#33BANKING SECTOR OVERVIEW ARMENIAN BANKING SYSTEM IS ADEQUATELY CAPITALIZED ABOVE THE REGULATORY REQUIREMENTS AND WELL-POSITIONED TO THE SHOCKS INDUCED BY THE PANDEMIC LIQUIDITY RATIO CAPITAL ADEQUACY RATIO 32.5% 32.1% 31.7% 28.0% 27.3% 27.1% 25.6% 2015 2016 2017 2018 2019 -Liquid Assets (% of Total Assets) 2020 2021 September BANKING SECTOR DEPOSITS 20.0% 18.6% 17.7% 17.6% 16.9% 17.2% 16.2% 16.4% 15.2% 15.2% 15.2% 14.7% 15.3% 14.0% 2015 2016 2017 CAR (% RWA*) 2018 2019 2020 -Tier-1 CAR (% of RWA) 2021 September * Risk Weighted Assets NON-PERFORMING LOANS AND COVERAGE RATIO* 65.1% 62.9% 62.9% 62.9% 62.9% 78.8% 57.3% 57.5% 3,462.33 73.3% 74.9% 68.9% 70.6% 66.8% 59.4% 3,329.28 3,256 2,728 2,464 2,177 1,789 22 32 2015 2016 2017 Total Banking Sector Deposits (AMD bln) 2018 2019 4.3% 4.6% 4.0% 3.1% 3.4% 4.6% 2020 NPL Coverage ratio (%) 2015 2016 2017 2018 2019 2020 2021 September NPL (% of Total Loans) Deposits (% of Total Liabilities) * Excluding watch category loans and reserves Source: CBA 3.0% 2021 September#34CONTACTS AND USEFUL LINKS Public Debt Management Department Ministry of Finance, Republic of Armenia Tel.: +374 11 910 405, +374 11 910 407, +374 11 910 416 Web: www.minfin.am E-mail: [email protected] [email protected] Other sources of information ➤ The Government of the Republic of Armenia Ministry of Finance Statistics Committee Ministry of Economy Central Bank of Armenia www.gov.am www.minfin.am www.armstat.am www.mineconomy.am www.cba.am The list of Primary Dealers AMERIABANK CJSC ARDSHINBANK CJSC ARMBUSINESSBANK CJSC ARMECONOMBANK OJSC CONVERSE BANK CJSC VTB ARMENIA CJSC 33