‘KEEP DEPOSITS IN DRAMS’, ARTUR JAVADYAN, CHAIRMAN OF THE CENTRAL BANK

168 Zham
March 19 2009
Armenia

Government does not intervene to restrain depreciation of dram

[Correspondent] Mr Javadyan, after the 3 March shock [when Armenian
national currency – dram – depreciated by about 30 per cent] the
dollar is slowly gaining value. Is this an expression of a market
demand at present? Now there are opinions that the Central Bank is
still intervening formation of the exchange rate. According to the
same assessment, if the Central Bank does not really intervene in
the formation of the rate, then the exchange rate of the dollar would
have been much higher.

[Javadyan] There is no problem, this is an expression of the
market. The banks participate in the stock exchange transactions,
they trade between each other. I already said that the Central Bank’s
role is minimal. I am sure that this cannot continue one-sidedly –
it is also possible that a drop [in the exchange rate] would take
place in these days.

[Passage omitted: Javadyan says no pressure on the banking sector
at present]

[Correspondent] How can one explain the incomparably small amounts
of transactions in the stock exchange? We already used to have
transactions amounting to 20-30m dollars per day.

[Javadyan] Everything needs time to orient itself and this is
normal. No large-scale transactions take place after precision of
the exchange rate.

[Correspondent] Assessments are voiced during discussions connected
with the dollar exchange rate that over the past months, the Central
Bank carried out interventions totalling 400-800m dollars. How many
millions of dollars did the Central Bank channelled actually to this
end over the past months?

[Javadyan] We will soon publish the amount of the interventions and
you will see it. It is less than 800m and more than 400m. This figure
is not essential because the majority of the intervention is in our
banks. Banks were short of dollars due to the policies of the Central
Bank and the government over previous years. Deposits of individuals
made 65 per cent, and deposits in foreign currency were 35 per cent
only. The total amount of deposits made up to 500bn in Armenia drams
[about 1.3 bn dollars]. We had an opposite ratio in the past months –
70/30. So, if we calculate, we will see that in the recent months,
most part of our interventions in banks replaced deposits in drams.

[Correspondent] There is an opinion that big importers received
especially big profits as a result of the interventions.

Importers did not make profits

[Javadyan] No, 400m dollars out of this went to exchange of
deposits. The other part was purchased by commercial banks. As a result
of this, the banks obtained liquid assets, and banks purchased currency
to the tune of 280m dollars in the recent months. Of course part of
it was purchased by importers. It is clear that the HayRusgazard
[Russian-Armenian gas supply company] needed to purchase 25-30m
dollars per month to pay for gas. In turn, banks had to find this
currency from somewhere. However, a very big part of importers used
other places and not banks.

[Passage omitted: Javadyan denies reports that there was outflow of
money from Armenia to keep the exchange rate at 305 drams per dollar]

[Correspondent] The Central Bank has been urging people for years
to keep their deposits in drams. However as a result, those who had
deposits in drams incurred losses and still continue incurring losses.

[Javadyan] Now, I am repeating again – keep deposits in drams. The
stability of the dram, its exchange rate is not defined by the currency
exchange rate, but by inflation. If there is 20-25 per cent inflation
in our republic, then the interest rates received from banks are lower
than that and they [people] will incur losses due to this. However,
if at present deposits in drams have an interest rate of 10-12 per
cent and we have almost no inflation at the moment, and I am sure,
we will have 8-9 per cent inflation by he end of the year, they will
benefit in that case.

[Passage omitted: Javadyan says that banks will increase deposit
interest rates if they see that the inflation rate is growing.]

[Correspondent] Are you sure that we will have 8-9 per cent inflation
by the end of the year because prices of other products and services
will naturally hike due to increase in gas and electricity prices?

[Javadyan] Of course, this is included in the 9 per cent [inflation]
calculation announced by us.

[Correspondent] Mr Javadyan, in your opinion, at what stage of the
crisis is Armenia now: in the beginning, or at the peak?

[Javadyan] I don’t want to make any forecasts. In my subjective
opinion, the world is already approaching the peak.

From: Emil Lazarian | Ararat NewsPress