YEREVAN, April 9. /ARKA/. The IMF recommends the Central Bank of Armenia to buy dollars by this summer to prevent serious fluctuations in the forex market and to ensure the required buffer reserves, the head of the IMF mission in Armenia Mark Horton told reporters on Wednesday.
According to Horton, the forex market trends may change in the period from April to June influenced by proceeds from tourism, agricultural exports and reduction in gas consumption.
But the situation may be difference after October, the head of the mission said.
“We are not planning a sharp depreciation, but the supply and the demand will change in the market,” Horton said.
Horton said the real foreign currency rate is affected also by the current account deficit that is about 10% of the GDP, which is relatively high suggesting possible weakening of the Armenian dram in the next 3-5 years. This may be an adjustment to the current difficult situation, he said.
“We have carried out studies of the monetary and credit policy, and believe that it is now the most favorable moment for lowering the rates and buying dollars in the market,” the head of the mission said.
Horton said devaluation of the national currency at the end of 2014 (14.1%) was lower than in the neighboring countries, particularly in Azerbaijan due to 35% reduction in oil prices and in Russia due to the sanctions and the capital drain.
Horton reminded of the important measures taken by the Central Bank to stabilize the situation with sharp fluctuations in the currency market in late December 2014. Particularly, the central bank raised the reserve requirement and the Lombard repo rate to tamp down the plummeting of the rates so that borrowers had no difficulties in repaying their loans in dollars, before some other measures would be taken, according to Horton.
As a result, Armenia’s forex reserves have reduced subsequently, and they should be replenished either from foreign funds or through a trade surplus, Horton said.
Today the central bank’s interference in the forex market is minimal, and the regulator will try to gradually lower the reserve requirement for the banks, Horton said.
At the same time, according to the head of the mission, dollarization level in Armenia is still high, about 70%, and any fluctuation may seriously affect the financial market.
Armenia’s gross international reserves amounted to $1,260.9 million in February 2015, a 6.6% decline over the month. In 2014, the gross international reserves fell by 33.8% or $762.3 million to $1,489.3 million.
According to Armenia’s National Statistical Service, the Armenian dram fell by 14.1% in December 2014 against December 2013. Sharp depreciation of the national currency in Armenia started on November 24, when the dollar rate jumped by 16.6 points to 435 drams per $1. On December 17 the rate hit the ten-year high – 527.20 drams per $1. Starting from December 18, the Armenian dram began stabilizing following the central bank’s and the government’s measures. The exchange rate is 473.04 drams per $1 today. –0–
