NINKE OMES SAYS FLEXIBLE EXCHANGE RATE REGIME IS THE BEST VARIANT FOR ARMENIA

ARMENPRESS
March 3, 2009

YEREVAN, MARCH 3, ARMENPRESS: "The International Monetary Fund was long
time advising Armenia and suggesting passing to a regime of "flexible"
exchange rate. This is the best variant for this country", permanent
representative of IMF in Armenia Ninke Omes told today journalists.

At the same time she noted that for the Central Banks of each country
it is very difficult to decide which the most optimal exchange rate is.

"If the exchange rate is fixed on a quite strong level, it means that
export for Armenia becomes rather expensive which negatively reflects
on the economic growth as well as on the rate of unemployment and
poverty. On the other hand if the exchange rate is fixed on a very
weak level, it means that the economy may be "overheated" which may
result in inflation. This is the reason why we praise the "flexible"
exchange rate, so that the market itself finds an optimal variant",-
the specialist explained.

According to her, today neither the Central Bank, nor the IMF can
say how much the money will devaluate. But the IMF tried to conduct
certain calculations applying three different models. Mentioning that
these calculations should not be regarded as absolute, N. Omes said
that it is possible that by the end of the year the exchange rate
will vary between 17-40%.

Bringing examples of other countries she noted that Belarus and
Kazakhstan devaluated their currency for nearly 20%, Georgia – for
11%. The process had a great influence especially on the Russian
economy, where the national currency gradually devaluated for 35%.

The specialist also noted that the IMF program which is implemented
with Armenia allows the Central Bank somehow to intervene the process:
there are very few countries where the currency is "flexible" and
the Central Banks do not intervene.

"We suggest that the Central Bank intervenes only in case there is a
very high fluctuation, so that to avoid abrupt changes. The Central
Bank should not fix a purposeful exchange rate and must allow the
exchange rate to "float"",- she said.

Commenting on the steps of not selling of the dollar by the Armenian
banks during the latest days, N. Omes noted that everyone waited for
this devaluation and saved the dollars. She expressed hope that in
the nearest future the banks and people will start selling dollars.