Friday, February 10 2023 11:18

ArmInfo. Armenia's commercial banks and lending agencies will from now on issue consumer and mortgage loans in AMD terms only. Armenia's Parliament is  discussing the draft amendments to the Law on Currency Control. 

Co-author of the draft Gevorg Papoyan, Chairman of the Standing  Committee on Financial-Credit and Budgetary Affairs, said that  against the background of geopolitical developments, uncertainties in  financial and non-financial markets, including foreign exchange  transactions, have significantly increased. In this context, currency  fluctuations carry serious risks, especially for those citizens of  the country who have attracted loans in currencies, especially  mortgage loans. To avoid possible risks, it is proposed to issue  mortgage loans exclusively in the national currency - drams. At the  same time, we are talking only about the residents of Armenia.  "People who attract or have already attracted mortgage loans for a  period of 20 years in foreign currency are exposed to very serious  risks," the deputy said. He added that 2 months ago the euro exchange  rate was 392 drams, and a citizen who attracted a loan in euro at  that time, today pays 9% more funds, since the euro exchange rate  rose to AMD 427. 

According to the draft, foreign-exchange mortgage loans can only be  issued to nonresidents, whereas consumer and mortgage lending to  residents both affords opportunities and poses risks.

"Interestingly, the recent period has seen a trend of mortgage  lending in Euro while Armenian citizens get their incomes in Armenian  drams," Mr Papoyan said. 

Often, those who attract foreign currency mortgage loans, due to  their illiteracy, pay attention to the difference of 1-2% between AMD  and foreign exchange terms, as a result of which they subsequently  face serious problems. "If today a citizen attracts a mortgage loan  in US dollars for a period of 20 years, the rate of which is  currently 400 drams, in 10 years he may face the problem of payments  at the rate of 540 drams," the deputy noted, not ruling out the  possibility and lower rates. "There is indeed such an opportunity,  taking into account the "floating" exchange rate, but you cannot be  guided only by this circumstance, since if the rate rises in 10  years, a citizen will pay 20.30, 40 percent more," Papoyan  emphasized.

The non-performing AMD loans constitute 1.5 to 2 percent in Armenia's  banking system, foreign-exchange loans, 4.5-6%. In shock periods,  especially in 2014, the share of non-performing foreign-exchange   loans reached 12%, with that of AMD loans remaining 4.4%.