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-
