RATING ASSIGNED TO ARMENIA CAN BE CONSIDERED QUITE GOOD: INTERVIEW WITH CB CHAIRMAN

ARKA News Agency, Armenia
June 7 2006

Exclusive interview given to the ARKA News Agency by Chairman of the
Central Bank of Armenia Tigran Sargsyan.

ARKA: Mr. Sargsyan, would You comment on Armenia’s getting the
credit rating?

T. Sargsyan: Armenia will appear on the world’s financial map as
early as now, and all the potential and real market participants, as
well as investors, will see Armenia on this map with its sovereign
rating. This will help everybody form the idea of the economic and
political situation and on the country’s credit worthiness. Besides,
this also means that in the future we must implement all our
national and investment projects to make the country more attractive
to investors. On the other hand, it is a unique chance to get an
impartial estimation of the real situation in our economic, political
and social life.

ARKA: What do You think, does the “BB-” rating assigned to Armenia
reflect the real situation in Armenia’s economy, its political risks?

T. Sargsyan: The Fitch Company is a rather well-known company – it is
among the three best known companies along with Moody’s and Standard
Poor’s, and we cannot ignore their authoritative opinions. We just
should consider the parameters, the strong and weak points reflected
in the report for the Armenian authorities’ further actions to be
aimed at gradual rise in the rating. Of course, we would like to get
a rating much higher than “BB-“. Any country seeks a better rating
and a more favorable situation on the financial map of the world and
for investors.

ARKA: What are the current ratings of our closest neighbors in
the region?

T.Sargsyan: Georgia’s rating is one mark lower than Armenia’s,
and Azerbaijan’s is one mark higher. However, there are a number of
peculiarities. First, ratings agencies seem to initially display a
more conservative approach to estimations, which is quite reasonable.

Azerbaijan started from a much lower rating that we did. So, since we
are just starting this process, it is quite a good start compared with
Azerbaijan. Besides, we think that we have a sufficient potential for
further gradual rise of Armenia’s rating. In general, Armenia is at
the same level with Turkey and Brazil, and the “BB-” rating assigned
to our country can be considered quite good for a start.

ARKA: When can the rating be revised?

T. Sargsyan: This is continuous monitoring, which will be conducted in
future as well. If any radical changes occur in our life, estimation
parameters serious change, that is, serious progress takes place,
the rating will mechanically be raised or lowered.

ARKA: What is the benefit of Armenia’s banking system from the country
rating? What opportunities and prospects open up?

T. Sargsyan: First, with the country rating available, commercial
banks can directly get their own ratings by means of rating agencies,
which is of high importance for us. In turn, rating agencies themselves
will find it much easier to work with commercial banks and enterprises
wishing to get ratings. As regards investors, they will be enabled to
really estimate the ratings of the country and of Armenian companies,
including commercial banks, and form a real idea of the state of
affairs not only in the country, but also in particular banks, which
can become their potential partners.

ARKA: Rating also implies the possibility of issuing bonds. How
promising is this for Armenia?

T. Sargsyan: This issue has been discussed by RA Premier-headed Supreme
Economic Council. Later, Armenia will enter the international financial
markets with its securities. However, it is inadvisable during the
next two years, because out medium-term financial program does not
yet envisage such measures. That is, we do not yet have to attract
funds for the country’s needs.

In future, depending on the progress of our reforms, particularly on
the progress of our programs with the WB and IMF, and if the rates
of economic growth are as high as now in two years, this task, I
think, will be a topical one – not only for attracting funds for the
Government’s needs, but, first of all, for demonstrating Armenia’s
solvency and credit worthiness and for confirming its rating. And
this attitude to the foreign debt may in principle contribute to the
rise of our rating.

ARKA: What are Your comments on the situation on Armenia’s foreign
exchange market? Will the dram revaluation continue or is it a
temporary process?

T. Sargsyan: One of the weak points, which is indicated by the Fitch
Company in estimating our rating, is a high dollarization level in
Armenia. In turn, this means that we have serious chances to get
our country rating raised. The only thing required is to reduce the
dollarization level, which means that we must change our people’s
way of thinking and attitude to the national currency.

For most of us the national currency must be not only the principal
means of payment, but also a means of saving. Our major problem is
smooth dedollarization during the next 2-3 years. Armenia’s citizens
must give priority to the national currency. Exchange rate fluctuations
will be less appreciable, and the population will be less sensitive
to them.

If get the population’s main incomes and expenses to be in the national
currency, and the national currency’s purchasing power to be estimated
in conformity with the price rise, we can then speak of rather serious
progress. And that will inevitable reflect on out country rating.

ARKA: What is Your estimate of Armenia’s macroeconomic indices over
the last five months?

T. Sargsyan: Early this year we had some fears of the accumulated
inflation potential. The CBA aimed at toughening the monetary policy.

I think that these measures, along with the RA Government’s decision
on gradual rise in gas prices, proved rather effective, as they
considerably reduced the accumulated potential. Now we are within the
planned indices. The inflation level is under control as well. The
rates of economic growth inspire optimism. We think that the results
of the first five months will allow us to forecast that we will be
able to close the year with inflation within 3% and two-digit GDP
growth.