IMF OFFICIAL CONSIDERS CBA’S POLICY ON MAINTAINING FLEXIBLE FOREIGN CURRENCY EXCHANGE RATE AND STABLE PRICES APPROPRIATE

Noyan Tapan
Jul 02 2007

YEREVAN, JULY 2, NOYAN TAPAN. Marta Castello Branco, the head of
the IMF delegation, which is in Armenia from June 26, at the July
2 press conference, said that the CBA’s policy on ensuring stable
prices and maintaining foreign currency flexible exchange rate
remains appropriate.

In her words, large foreign exchange influx to Armenia, which
is mainly related to remittances and investments in real estate,
has already resulted in a considerable appreciation of the RA dram,
which complicates the conduct of monetary policy. M. Castello-Branco
said that the above mentioned inflows are likely to continue in the
foreseeable future, and further dram appreciation is also inevitable,
which will come in the form of either nominal appreciation or
inflation.

As she evaluated, though export sectors and remittance-dependent
households have suffered from the appreciation, on the whole, the
Armenian economy remains competitive, the evidence of which are high
export rates. At the same time, it was mentioned that for maintaining
competitiveness of RA economy, it will require more efforts from the
RA government aimed at improving the business climate and raising
the productivity.

The IMF official emphasized that though the CBA can limit the nominal
appreciation of the dram, nevertheless, the government should continue
conducting reasonable tax and credit policy and exert efforts in the
direction of implementing such structural reforms, which will limit
appreciation pressures and will help enterprises to more easily adjust
to these pressures.