Wednesday, May 5 2021 13:46
Naira Badalian

The art of interpretation: 50% is also a result. "Prosperous Armenia"  indulges in populism, insisting that writing off debt on loans is  justified

The art of interpretation: 50% is also a result. "Prosperous Armenia"  indulges in populism, insisting that writing off debt on loans is  justified

ArmInfo. MP from the Prosperous Armenia faction Mikael Melkumyan considers the proposal of the leader of the party Gagik Tsarukyan to "nullify" citizens' loans in the  amount of up to AMD 3 million as appropriate and topical. "The  proposal passed an expert discussion at the highest level, and the  comment of the head of the Central Bank, perhaps, confirms that it is  justified," Melkumyan said on May 5 in an interview with reporters.

The day before, the Chairman of the Central Bank of Armenia Martin  Galstyan, answering the question of whether he considers it realistic  to write off debts of more than 2 million borrowers, said: "I think  that absolutely should not be done. Earlier we had such an experience  - debts of a certain group of people were written off, and then our  research showed that 50% of these people were again in the same  situation as before the debt was written off, "he said. At the same  time, Galstyan added that in this way a specific incentive mechanism  is created, which does not have economic logic and runs counter to  the concept of justice. "So I think it's unwise," he added.

Meanwhile, Mikael Melkumyan interprets the words of the head of the  financial regulator in his own way.  Thus, according to the  "prosperous" MP, this suggests that such a "zeroing" at one time led  to an improvement in the financial condition of 50% of amnestied  borrowers, and only the remaining 50%, possibly, were again "in the  captivity of the debt burden."

Melkumyan shared "his professional" opinion. The problem is that,  according to the lawmaker, in a war, pandemic, when there are no  jobs, and people have assumed credit obligations to ensure their  normal activities, they cannot be expected to be able to timely  fulfill their obligations to creditors, " since they are not to blame  for the creation of such conditions. " "Plus, 50% is also a result,  and during this event (writing off debts up to 3 million - Ed. note),  we will be in completely new economic conditions," he said.  In  addition, according to him, if you look closely at the dynamics of  loan growth, you can see that the number of loans issued over the  past 2.5-3 years has grown by 550-600 thousand. "The bulk of loans  issued are consumer loans, followed by agricultural loans, student  loans, etc. That is, people are not able to live, exist without  loans, and the conditions created in the country do not allow them to  get out of this situation, "Melkumyan said.

The parliamentarian recalled Tsarukyan's words that the banks of  Armenia perform the function of pawnshops and do not leave any  chances for development. "If the current monetary policy continues  for another year or a year and a half, the number of loans will reach  4-5 million - more than the country's population," he said.  Proceeding from this, Mikael Melkumyan urges to listen to Gagik  Tsarukyan's proposal - to amnesty debts on loans, and then, after  people "breathe fresh air", to think about the competent work of  credit policy.

On May 4, during a press conference, the head of the Central Bank  Martin Galstyan stated that the banks of Armenia revised and pardoned  large amounts of loans to the wounded and killed servicemen during  the Artsakh war. The lion's share of the amnestied loans fell on the  families of the dead servicemen. In total, referring to the latest  data, M. Galstyan said that within the framework of this bill, loan  obligations for 2 billion drams have already been forgiven. At the  same time, the volume of non-performing loans in the banking system  of Armenia at the moment is about 7%. Compared to the end of 2020,  this figure increased from 6.6% to 7.1%.

According to independent financial analysts, Prosperous Armenia's  proposal is purely an electoral, populist action. This kind of  pre-election populism is quite popular in post-Soviet electoral  processes. At the same time, they note that, despite the sufficient  stability of the banking system of Armenia, its main indicators over  the past year have deteriorated somewhat due to the coronavirus  crisis. Thus, the NPL of the system has reached 7.1% of assets and  may rise up to 10% by the end of the year, which is the maximum level  by international standards.

Analysts note that NPL growth was predicted even during the first  "credit amnesty" in 2018, which only technically and for a short time  "revitalized" banks' balance sheets, creating the basis for their  intense intoxication in the future, since the reasons for this  process are still relevant and related not only with a decrease in  the real incomes of the population, and, as a consequence, a decrease  in the volume of consumer lending, but also with a decrease in the  level of profitability of the business, lending to which is also  stagnating and cannot compensate for losses from retail credit. Thus,  the proposal of "PAP" is a rather dangerous undertaking, capable of,  if not undermining, then substantially "spoiling" the stability of  the Armenian banking system, especially since some of them already  have a level of real non-repayment that is significantly higher than  the 15% level.

According to the rating agency AmRating, the accelerated growth of  toxic loans in 2020 was reflected in the "drawdown" of profits. Thus,  the total net profit of the banking system of Armenia, amounting to  60.4 billion drams ($ 115.7 million) in 2020, decreased by 20% per  annum (against an increase of 34% in 2019), which was observed  against the background of an increase in the volume of overdue loans  by 38.4% ( against a paltry 3% decline in 2019).

Moreover, only in the IV quarter the profit dynamics sharply went  into an 89.5% decline (from 3.5% growth in the III quarter) with the  continuing double-digit growth of overdue loans, which could have  been higher if it were not for the regulator's proposal to "freeze"  for a year, part of the toxic load, which, nevertheless, did not save  profits from subsidence, including for 8 banks that received a  significant loss.  This situation, according to the rating company,  was accompanied by an approaching stagnant growth in the amount of  healthy (standard) loans in Q4 to 1.3% (from 3.5% in Q3), with a  slowing annual growth to 10.3% (from 13.3 % in 2019). The annual  upward trend of this portfolio, presumably, was preserved due to the  renegotiation of agreements during the credit holidays (from March 13  to June) and the active participation of banks in the 1st and 2nd  anti-crisis state programs. Nevertheless, analysts note that the  toxicity of consumer loans is growing at an outstripping pace today. 

POST A COMMENT
Input digits     


News
Forecast: The economic consequences of the war for Armenia are still  aheadForecast: The economic consequences of the war for Armenia are still  ahead
$ 3 billion will be allocated from the state budget for the 4th  tranche of the North-South road$ 3 billion will be allocated from the state budget for the 4th  tranche of the North-South road
EBRD to provide Air Navigation of Armenia with EUR 3 millionEBRD to provide Air Navigation of Armenia with EUR 3 million
Head of the Audit Chamber of Armenia presented facts of abuses in the  field of road constructionHead of the Audit Chamber of Armenia presented facts of abuses in the  field of road construction
S&P revised the outlook on Ameriabank to ``Stable`` S&P revised the outlook on Ameriabank to ``Stable`` 
Armenia`s international reserves increased by 11.3% per annum by June  2021Armenia`s international reserves increased by 11.3% per annum by June  2021
Central Bank of Armenia: Net inflow of transfers from individuals  grew in Jan-April 2021 by 80% per annumCentral Bank of Armenia: Net inflow of transfers from individuals  grew in Jan-April 2021 by 80% per annum
Armenia will be among the nominees for World Travel AwardsArmenia will be among the nominees for World Travel Awards
Armenia and Iran intend to expand cooperation in a number of economic  areasArmenia and Iran intend to expand cooperation in a number of economic  areas
Ministry of Finance: Three quarters of Armenia`s public debt is in  foreign currency, which creates additional risks in connection with  the management of public debt Ministry of Finance: Three quarters of Armenia`s public debt is in  foreign currency, which creates additional risks in connection with  the management of public debt 
World Bank`s forecast for GDP growth in Armenia has not changed: 3.4%  in 2021, accelerating to 4.3% in 2022World Bank`s forecast for GDP growth in Armenia has not changed: 3.4%  in 2021, accelerating to 4.3% in 2022
CBA initiative to create a centralized register of bank accounts of  individuals was approved by relevant parliamentary committeeCBA initiative to create a centralized register of bank accounts of  individuals was approved by relevant parliamentary committee
RUSAL`s foil-rolling mills to join AL +RUSAL`s foil-rolling mills to join AL +
AraratBank raises USD 14.5 m arranged by Symbiotics AraratBank raises USD 14.5 m arranged by Symbiotics
UAE UAE "Masdar" company to build a solar power plant in Armenia with a  capacity of 200 MW
EDB is ready to consider integration projects in the region   EDB is ready to consider integration projects in the region  
Customer base of Armenian banks increased by 6% per annum by April,  and accounts  - by 4.3%Customer base of Armenian banks increased by 6% per annum by April,  and accounts  - by 4.3%
Head of Telecom Armenia shared his success story at Reinvent by  Renderforest conferenceHead of Telecom Armenia shared his success story at Reinvent by  Renderforest conference
In Armenia`s foreign trade turnover Russia and China continue to be  leaders in exports and importsIn Armenia`s foreign trade turnover Russia and China continue to be  leaders in exports and imports
Telecommunications sector revenue in Armenia growsTelecommunications sector revenue in Armenia grows
Cargo transportation in Armenia by May 2021 increased by 17.7%, with  a decline in passenger traffic by 17.4%Cargo transportation in Armenia by May 2021 increased by 17.7%, with  a decline in passenger traffic by 17.4%
The metallurgical industry of Armenia increased production by 26.9%  per annum by May 2021The metallurgical industry of Armenia increased production by 26.9%  per annum by May 2021
Armenia`s industrial sector slowly recovers from coronavirus crisisArmenia`s industrial sector slowly recovers from coronavirus crisis
Armenia`s foreign trade turnover with EU countries increased by 12.4%  per annum by May 2021Armenia`s foreign trade turnover with EU countries increased by 12.4%  per annum by May 2021
Armenia`s foreign trade turnover with  EAEU countries grew by 1.6%  per annum in January-April 2021Armenia`s foreign trade turnover with  EAEU countries grew by 1.6%  per annum in January-April 2021
Armenia`s foreign trade turnover increased by 7.2% per annum in  January-April 2021Armenia`s foreign trade turnover increased by 7.2% per annum in  January-April 2021
 Armenia intends to form a national innovation system by 2025 Armenia intends to form a national innovation system by 2025
Revenue part of Yerevan budget in 2020 is fulfilled by 84.6%Revenue part of Yerevan budget in 2020 is fulfilled by 84.6%
Armenia`s public debt is approaching $ 9 billionArmenia`s public debt is approaching $ 9 billion
In 2020, subsidies from state treasury of Armenia to regional  administrations amounted to about $ 115 millionIn 2020, subsidies from state treasury of Armenia to regional  administrations amounted to about $ 115 million
Armenia`s Ministry of Finance: In 2020, the budget of the  agricultural sector was revised downwardArmenia`s Ministry of Finance: In 2020, the budget of the  agricultural sector was revised downward
Aluminum foil production volumes decreased by 3.7% per annum in  January-April 2021 in ArmeniaAluminum foil production volumes decreased by 3.7% per annum in  January-April 2021 in Armenia
Electricity generation in Armenia slows down annual growth rateElectricity generation in Armenia slows down annual growth rate
Armenian textile industry increased 3.2-fold in January-April 2021Armenian textile industry increased 3.2-fold in January-April 2021
Economic activity in Jan-April 2021 increased by 2.6% per annum in  ArmeniaEconomic activity in Jan-April 2021 increased by 2.6% per annum in  Armenia
Export of buckwheat from Russia has been temporarily bannedExport of buckwheat from Russia has been temporarily banned
At the end of June, Agarak Copper-Molybdenum Combine CJSC will switch  to completely closed cycle of water consumption ahead of scheduleAt the end of June, Agarak Copper-Molybdenum Combine CJSC will switch  to completely closed cycle of water consumption ahead of schedule
In 2020, U.S., CoE and UN donors` financial assistance to Corruption  Prevention Commission of RA exceeded state budget allocations In 2020, U.S., CoE and UN donors` financial assistance to Corruption  Prevention Commission of RA exceeded state budget allocations 
Ameriabank ready for initial public offering of shares - Managing Director, Financial Institutions for EBRDAmeriabank ready for initial public offering of shares - Managing Director, Financial Institutions for EBRD
In 2020, the parliament spent 466 million drams on bonuses, monetary  rewards and special paymentsIn 2020, the parliament spent 466 million drams on bonuses, monetary  rewards and special payments
The y-o-y inflation in Armenia in May 2021 was 5.9%, for five months  - 4.7%, with a deflation of 0.4% in May The y-o-y inflation in Armenia in May 2021 was 5.9%, for five months  - 4.7%, with a deflation of 0.4% in May 
Janjughazyan told how much the state spent on the maintenance of the  bureaucratic apparatus of ArmeniaJanjughazyan told how much the state spent on the maintenance of the  bureaucratic apparatus of Armenia
Caucasian Power Transmission Network Program will be operational  after 2025 at bestCaucasian Power Transmission Network Program will be operational  after 2025 at best
Martin Galstyan: The new forecast report of the Central Bank for 2021  is supplemented with an apocalyptic scenario, but in reality the  economy began to breathe and expectations for GDP growth will be  improvedMartin Galstyan: The new forecast report of the Central Bank for 2021  is supplemented with an apocalyptic scenario, but in reality the  economy began to breathe and expectations for GDP growth will be  improved
Armenian and Russian sides to discuss extension of service life of  Armenian NPP until 2031Armenian and Russian sides to discuss extension of service life of  Armenian NPP until 2031
Deputy Minister: Discussions are underway with Iran on the launch of  the Meghri FEZ, the issue became especially relevant after the war in  ArtsakhDeputy Minister: Discussions are underway with Iran on the launch of  the Meghri FEZ, the issue became especially relevant after the war in  Artsakh
In 2020, expenditures of Armenian Foreign Ministry amounted to  approximately $ 35 millionIn 2020, expenditures of Armenian Foreign Ministry amounted to  approximately $ 35 million
In 2020, EU allocated 68.7 million euros to Armenia for budget  assistance In 2020, EU allocated 68.7 million euros to Armenia for budget  assistance 
The company of the former Deputy Energy Minister and the son of the  former Prime Minister of Armenia received another tax benefit from  the governmentThe company of the former Deputy Energy Minister and the son of the former Prime Minister of Armenia received another tax benefit from the government
Ardshinbank invited children to the cinema on International Children’s DayArdshinbank invited children to the cinema on International Children’s Day
IFC’s New Partnership with Evocabank, to Support Smaller Businesses, Boost Resilience and Drive Recovery in ArmeniaIFC’s New Partnership with Evocabank, to Support Smaller Businesses, Boost Resilience and Drive Recovery in Armenia
Ameriabank Announces a Contest for Bank Card DesignAmeriabank Announces a Contest for Bank Card Design
Scientists will again discuss problems and prospects for development  of geothermal energy in ArmeniaScientists will again discuss problems and prospects for development  of geothermal energy in Armenia
PSRC Head: There are no problems with the production capacity of  electricity in ArmeniaPSRC Head: There are no problems with the production capacity of  electricity in Armenia
Chairman of SCPEC: The price of butter will rise again Chairman of SCPEC: The price of butter will rise again 
Head of SCPEC: There will be no reduction in the price of gasoline Head of SCPEC: There will be no reduction in the price of gasoline 
 On June 1, events were held with the financing of IDBank On June 1, events were held with the financing of IDBank
Deputy Minister of Economy: Positive impulses from Russia inspire  optimism for restoration of  tourism sector in Armenia Deputy Minister of Economy: Positive impulses from Russia inspire  optimism for restoration of  tourism sector in Armenia 
Head of State Revenue Committee of Armenia urged citizens not to try  to smuggle Turkish-made goods into the country across the state  borderHead of State Revenue Committee of Armenia urged citizens not to try  to smuggle Turkish-made goods into the country across the state  border
In period of pandemic and Artsakh war, almost 50 milion US dollars  premiums were allocated in public sector of ArmeniaIn period of pandemic and Artsakh war, almost 50 milion US dollars  premiums were allocated in public sector of Armenia
Read more


Exchange rates
11.06.2021
RUB7.240.05
USD518.61-0.67
EUR630.16-1.49
GBP733.681.60
CAD428.60-0.24
JPY47.34-0.08
CNY81.220.05
CHF578.35-0.94