Sat, 26 July
22.1 C
Yerevan
USD: 383.94 RUB: 4.85 EUR: 450.25 GEL: 141.78 GBP: 516.63

Chzmachyan says sharp devaluation of dram to favor exporters poses macroeconomic risks

YEREVAN, May 26. /ARKA/.  Sharp devaluation of the dram, Armenia’s national currency that could open up new prospects for Armenian exports, carries significant macro-economic risks, according to Samvel Chzmachyan, the  chairman of the Union of Banks of Armenia.

Speaking today at a meeting of the International Banking Council in Yerevan, he said some CIS countries practice artificial depreciation of their national currencies against  US dollar and  euro to promote national exports.

“Many countries with high, sometimes double-digit inflation, resort to aggressive devaluation of the national currency, which, apart from short-term positive effects, does not promise anything good in the medium and long term,’  he said.

He said  different trends dominate in Armenia. In particular, the Armenian dram depreciated against the US dollar in 2014 by almost 15%, and by 1.5%  throughout 2015 appearing to be the most stable currency across the Eurasian space.

According to Chzmachyan,  devaluation of the Armenian dram carries serious risks. In particular, as a result  almost immediately imports from third countries  become more expensive, as well as local products, made of imported raw materials and components. Moreover, imports from Russia, represented mainly by energy carriers, are also calculated in US dollars.

He went on to say that the devaluation of the national currency threatens the savings of the population, which in turn  reduce their purchasing power and lead to  further impoverishment. It has also  such negative macroeconomic consequences, as rising  inflation, a new wave of distrust in the national currency and, consequently, the growth of dollarization. This could entail intensive outflow of financial resources.

This, according to Chzmachyan, may damage both the banks’ dollar assets and borrowers, especially those who were provided with loans in foreign currency. He added that in Armenia the share of non-performing loans has increased from 6-7% in 2015 to 10%.

Under these conditions, according to Chzmachyan, the financial authorities reject creation of favorable financial conditions for relatively small layer of exporters. He said  total exports do not exceed US$1.5 bln. According to him, the government uses other instruments to help largest exporters.

Chzmachyan said in choosing between importers and exporters it is not profitable for the government to support exporters because exports are exempted from VAT, while importers pay VAT and customs duties.

Chzmachyan also noted that a decline in prices has restored to some extent the competitiveness of Armenian goods, but did not completely neutralize the continuing depreciation of the national currencies in partner countries, as evidenced by the strengthening of the real effective exchange rate of the dram.  -0-

spot_img

POPULAR

In Armenia, bad loans worth over $1 million have been written off under the state support program – Ministry of Social Affairs

14,757 applications for writing off bad loans have been received in Armenia within the framework of the relevant state support program, which started on February 1, 2025.

A scheme for stealing funds through fake investment platforms  exposed in Yerevan

A criminal group operating in one of the capital's business centers and stealing citizens' money through Internet calls has been exposed in Armenia, the Investigative Committee of Armenia reports.

Fitch forecasts Armenia to tighten fiscal policy after 2027

Fitch Ratings analysts forecast a tightening of fiscal policy by the republic's authorities in a new report on Armenia.

Fitch expects inflation in Armenia to remain within the target level until 2027

International rating agency Fitch expects inflation in Armenia to remain within the target level until 2027, although soft fiscal policy and the projected moderate weakening of the dram create certain risks.

Ranking of most profitable banks in Armenia based on results of first quarter of 2025

ARKA news agency publishes the ranking of the most profitable commercial banks in Armenia based on the results of the first quarter of 2025.

LATEST NEWS

spot_imgspot_imgspot_img