Friday, February 7 2020 22:30

ArmInfo.The CIS Interstate Bank initiates the creation of a mutual trade fund in the national currencies of the EAEU countries and the post-Soviet space. This was  discussed at the International Forum "National Currencies of the EAEU  Countries: Practical Experience" held in Yerevan today.

The forum participants noted a significant increase in recent years  of international trade, including within the framework of the EAEU,  nominated in national currencies and the gradual refusal of trading  agents from transactions with US dollars and euros. This is due to  the desire to circumvent, at times, expensive transaction costs in  the context of stabilization of the economic and exchange rate  situation in the EAEU countries.

As it was reported at the forum, today in mutual trade between  Armenia and Russia, contracts are more often denominated in Russian  rubles and, despite the presence of currency risks associated with  sanctions problems, 47% of transactions are carried out in Russian  rubles. Forum participants noted the need to develop technology for  direct quotations of national currencies and procedures for their  inexpensive hedging to further stimulate mutual trade.

Speaking at the forum, the head of the Armenian representative office  the Interstate Bank, former Minister of Economy of Armenia Vahan  Melkonyan noted the presence of numerous factors that make it  possible to use the Armenian national currency more actively in  export-import operations today. According to him, this is facilitated  by a well-functioning and stable banking system of Armenia, the  exchange rate stability of the Armenian dram, which in turn creates a  strong basis for reducing transaction costs and increase the speed of  operations. He noted that due to the very fact that the market has  matured and is ready to switch to settlements in national currencies,  that the Interstate Bank has initiated the creation of such a fund,  work with which will allow both financing foreign trade operations  without taking on commercial credit risks and making settlements  without serious currency risks.

Explaining his statement in an interview with ArmInfo correspondent,  Melkonyan noted that the work of exporters through Interstate Bank  will allow obtaining trade financing in national currency, especially  with the participation of manufacturers not only in purely commercial  transactions, but also in large public procurement contracts.   "Traditionally, exporters turn to commercial banks for rather  expensive loans, not being aware of the availability of other  opportunities and tools for trade financing. The tools of the  Interstate Bank can quite effectively replace them, while smoothing  out the possible credit and currency risks, distributing them among  itself and the customers, and acting as Bank - taking on the hedging  process.  For this, the bank has enough tools, direct access to the  exchange platforms of Russia, Armenia and other EAEU countries",  Melkonyan emphasized. He noted that the bank shares risks between all  participants in the process. <We will protect the deal, protect the  reputation of our client, although we may, at the same time, lose.   But we are a bank that does not pursue profit-making and our  statutory mission is to help promote the economic integration of the  EAEU and the CIS. Therefore, for very many products, the bank has  zero or almost zero commission rates>, the interlocutor said.

Speaking about the problem of stimulating Armenian exports, Melkonyan  expressed the view that, given the geopolitical tensions in the  region and the blockade of Armenia, the state could take on partial  subsidization of transport costs of exporters, taking not commercial  risks, which would be absurd, but political, country ones. He  emphasized that it would be justified to implement a project on  partial budget financing of export deliveries of goods of Armenian  producers, having allocated, for example, 50 million US dollars for  these purposes. According to his calculations, if sending a container  to Russia costs about 5 thousand US dollars, which is very expensive,  and if the government would take on subsidies at least a quarter of  this amount, then the country's export potential would jump by 10%  immediately, since the cut- off price is related with production  efficiency. Manufacturers, especially not very large ones, calculate  their costs and often refuse to export their products, and, of  course, to invest in the process of expanding production while not  having markets.

Meanwhile, according to Alexey Denisov, managing director of  international projects at the Russian Export Center, who spoke at the  forum, marketing research among the EAEU's foreign trade participants  shows that 12% of companies are already actively using national  currencies in their operations, and 36% are ready to switch to it.   The main problems that exporters point out are the high costs of  converting currencies, as well as the habits of making transactions -  their own or trading partners. They also indicate the presence of  currency risks due to sanctions measures, and expensive hedging  instruments. Market participants are also dissatisfied with the  limited number of trade finance instruments.

The work of exporters in the Russian market is also limited by the  low availability of the Russian ruble in the EAEU countries,  including the lack of a loan offer in rubles. He sees the reason for  this condition in the underdevelopment of domestic financial markets  and in the presence of regulatory restrictions that do not stimulate  the use of national currencies. The Interstate Bank is ready to take  on many of these problems as a player capable of actively working in  the field of conversion operations and hedging, in the market of  interbank lending and exchange transactions.

It should be noted that, according to preliminary data of the  Statistical Committee of the Republic of Armenia, in 2019 the foreign  trade turnover of Armenia amounted to 3,912.9 billion drams ($  8,154.1 million) with a slowdown in annual growth rates to 10.4% from  16.4% in 2018. In its structure, export volume accelerated annual  growth - up to 9.4% from 7.8% in 2018, amounting to 1.267.1 billion  drams ($ 2.640.3 million), while annual growth in imports slowed  sharply to 10.8% from 21.1% in 2018 , amounting to 2,645.8 billion  drams ($ 5,513.8 million).