IMF WELCOMES ARMENIAN CENTRAL BANKS’ TIME-TO-TIME INTERVENTIONS

ARKA
Dec 22, 2009

YEREVAN, December 22. /ARKA/. IMF Resident Representative to Armenia
Nienke Oomes, in an interview with ARKA News Agency, said: "We have
always advised Armenia to stick to a floating exchange rate. This,
however, does not necessarily mean that the CBA should not intervene
in the foreign exchange market at all. We think it is reasonable that
the CBA will intervene in the market from time to time in order to
prevent unexpected sharp daily exchange rate changes."

She finds it important that the CBA does not resist the overall
objective exchange rate trends and follows them. In the beginning of
this year, there were clear pressures for the foreign exchange rate
to depreciate, because of the large drop in remittances, exports,
etc, and it was clear that the CBA could not resist this depreciation.

During the next year, it is possible that there will be pressures
for the exchange rate to appreciate, when global growth resumes,
in which case the CBA should also not resist these pressures.

"In our view, the exchange rate should be determined by the market,
based on foreign exchange inflows and outflows. However, I repeat
that occasional interference of the CBA is justified in order to
prevent sharp short-term exchange rate fluctuations," Oomes said in
her interview.

"We think that the CBA has been doing a very good job in ensuring
financial stability. Compared to other countries, Armenia succeeded
in avoiding a banking crisis. The CBA has already strengthened banking
supervision and took several measures to protect the financial sector.

Subsequently, we are satisfied with the CBA’s financial sector
policies," she added.

Asked about likely share of non-performing banking loans at the end
of 2009, Oomes said: "We are not making such projections, however,
given the existing situation, the level of non-performing loans has
probably stabilized. It recently fell from 9.3 percent in September
to 8.1 percent in October."