Wednesday, June 15 2022 18:32

CBA Head considers it wrong to condition all economic phenomena on  behavior of exchange rate

CBA Head considers it wrong to condition all economic phenomena on  behavior of exchange rate

ArmInfo. Head of the Central Bank of Armenia,  Martin Galstyan, considers it wrong to condition all economic  phenomena on the behavior of the exchange rate. He stated this on  June 15, speaking from the rostrum of the National Assembly.

He explained that it is necessary to specify the available  approaches, the causal relationship - how much it is provoked by the  influx of international visitors and the behavior of aggregate  demand. "There are nuances of political decisions here. First of all,  I would like to note that the politicians of the Central Bank and the  Government should continue to be guided by the existing common  agenda. For the information of those who call on the Central Bank to  artificially devalue the Armenian dram, I want to note that they need  to be aware that the result of this will be high inflation, due to  which all citizens, even if they do not have enough money, will pay  the so-called inflation tax, i.e. subsidize export-oriented  enterprises.  I think it's correct to make a detailed analysis of the  current situation, which will allow avoiding artificial devaluation  of the national currency, , and at the expense of increased tax  collections due to inflation, the state will need to promote export  -oriented enterprises with the potential for dynamic development","  the head of the Central Bank emphasized, while noting that in the   case of revaluation of the national currency, the Public Services   Regulatory Commission should discuss the correspondence of tariffs  to the exchange rate.

Regarding the ratio of the dram/Russian ruble currency pair, he  stated that the real state of the Armenian dram has been devalued.   "And if we also take into account that inflation in Russia is higher,  then those exporters who bring goods to the Russian Federation and  fix contracts in Russian rubles exclusively benefit in the created  situation," M. Galstyan noted, advising those referring to the value  of exports to consider it in a complex with export directions.

Aaccording to the RA Statistical Committee, in January-April 2022,  exports from Armenia to Russia exceeded $279.9 million, with an  acceleration of y-o-y growth to 26.4% (from 20.9% in the same period  of 2021). And import from Russia to Armenia reversed the y-o-y  dynamics from a 5.9% decline to a 42.1% increase, reaching $623.4  million. Russia's share in exports in Armenia's foreign trade,  increased year-on-year from 27% to 27.3%, and in imports - from 32.4%  to 33.1%. Russia holds the lead both in terms of foreign trade turnover  in general and in terms of exports and imports in particular among the  countries of Armenia's trading partners. According to customs data,  agricultural goods, alcoholic products, textiles and other goods are  mainly exported to Russia from Armenia.

It should be noted that in the retail foreign exchange market of  Armenia, the dram against the Russian ruble devalued this year from  February 24 to June 15 inclusive by 20% - to 7.2 AMD / 1 RUB on  average. At the same time, during this period, the dram revalued both  against the US dollar - by 9% to 439 AMD/$1, and against the euro -  by 16% to 458.5 AMD/1EUR. Moreover, on June 14, on the day of the  revision of the refinancing rate by the Central Bank, the ratio of  the dram against the dollar and the euro changed from revaluation to  devaluation, but already on June 15, the devaluation rates against  these currencies narrowed significantly. It is appropriate to note  that high volatility in the foreign exchange market since March 2022  was due to comprehensive, unprecedented, large-scale US and European  sanctions against Russia against the backdrop of the Russian-Ukrainian  military-political conflict. 

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