Monday, July 18 2022 17:50

ArmInfo. Due to the revaluing of the dram Armenian developers are losing up to 25% of their income. Artak Andreasyan, a member of the Council of the Association of  the  Armenian Developers, stated this during a press conference on July 18.

In this vein, he explained that developers bought materials for their  work, the cost of which depended on the dollar, including metal and  cement. <For example, the metal was purchased at a time when the  dollar was equal to 525-530 drams, and the construction has already  reached a progressive level. Dram suddenly reevaluated- as a result,  according to the concluded agreements, developers lose up to 20-25%  of income.  Show at least one business area where, with such  long-term losses, the business would survive?", said the  entrepreneur.

Noting that the Central Bank is responsible for ensuring price  stability, Andreasyan, referring to the statement of the Regulator,  noted that the situation is due to a large influx of foreign currency  to the Armenian market. "Many citizens of the Russian Federation and  Ukraine came to us. We're not saying it's bad. They live here, spend  their currency, that's good, we don't complain. But this is abnormal  growth, this is toxic growth that threatens our economy. The Central  Bank says that it is not in a position to fight against it alone.  While we want to understand who should fight and what else should it  do?" According to him, the approaches of the Central Bank and the  government to this problem are reminiscent of a popcorn eater who  sits and watches a horror movie.

According to Andreasyan, today the Central Bank is solving a  short-term problem by keeping inflation at a relatively low level in  Armenia. But further, as the expert noted, the situation will worsen,  and inflation may reach double-digit rates. If now the Regulator is  faced with the task of not allowing the price of flour and sunflower  oil to rise, then tomorrow such a policy is fraught with a  significant increase in the risks of exporters, developers,  manufacturers who are already suffering losses and will be forced to  cut back and go bankrupt. <There will be unemployment, there will be  a shortage of goods. And with a deficit, everyone knows that  hyperinflation should be expected>, he stressed.

In turn, Tiran Harutyunyan, a member of the Council of the  Association of the Armenian Developers, added that developers are in  a difficult situation today, since, on the one hand, transactions are  indexed in dollars, which creates certain difficulties, and on the  other hand, the volume and cost of construction have increased. And  so many developers, he said, had financial problems.

"We do not understand what kind of monetary policy the Central Bank  is pursuing if we are not able to forecast the future, if there is a  serious lack of tools to manage future risks. And therefore we see  great risks in the current situation", he said.

Answering a question from an ArmInfo correspondent, Harutyunyan noted  that he would like to see steps from the side of the Central Bank  towards resolving the current situation. In this regard, he called  the reduction of the refinancing rate quite logical. "And secondly,  it is necessary to create a deficit of the dollar, to restore those  currency funds that we used when we had stressful situations  associated with an increase in the volume of the dollar," he said.

At the same time, a representative of the Association of Developers  noted that the organization tried to talk with the Central Bank, but  it was impossible to enter into a normal dialogue, since everyone had  their own position, their own truth, which did not  make things  easier in any way.

"Tomorrow, if our economy cannot be activated, cannot produce for  export, cannot sell its products, then the margin of imported  products will increase from 10-15% to 35-45%, because there will be  no replacement for local products," he said.

Since January 2021, the Central Bank of Armenia has gradually  increased the refinancing rate from 5.25%, bringing it to the current  level of 9.25%.

It should be noted that in the foreign exchange retail market of   Armenia from October 2021 to June 22, 2022, the dram revalued against   the dollar by 14% (from 485 AMD/$1 on average), against the euro - by   22% (from 563 AMD/1EUR on average), while devaluing against the ruble   by 6% (from 6.7 AMD/1RUB on average).  It is appropriate to note that   the unprecedented western sanctions imposed on Russia account for the  highly volatile market since this March. In particular, this year,   from February 24 to June 22, in the retail currency market of   Armenia, the dram devalued against the Russian ruble by 19% - to 7.1   AMD/1RUB on average. At the same time, during this period, the dram   revalued both against the US dollar - by 13% to 417 AMDs / $ 1, and   against the euro - by 19% to 439.5 AMD / 1 EUR.    

Head of the Central Bank of Armenia Martin Galstyan, in  response to  calls for the need to artificially  enter the market,  devaluing the  existing exchange rate by the  Regulator, which may  help a certain  segment of the business -  exporters - he drew  attention to the fact  that as a result, the  general public will pay  for such actions. "If  we go against our mandate, artificially devalue  the dram, then we  will face a new wave  of inflation which will  affect everyone," the  head of the Central  Bank said.  In the current conditions, he noted  the importance of the state's   sectoral policy, on the basis of  which the most affected sectors that   have lost their  competitiveness will receive assistance from the   state in the form  of additional subsidies, tax cuts, etc.  Earlier, Armenian  entrepreneurs issued a statement in which they  indicated   that the  exporters of agricultural products, beverages, as  well as  the  tourism sector, the IT sector and developers, suffered  the most   from the strengthening of the national currency.  

Giving an assessment of the policy of the Central Bank in the current   realities, the official noted: "We live in a non-trivial time, and as   of today it is necessary to use all the tools so that the economy   reaches high growth rates." At the same time, he pointed to the large   amount of work that the Ministry of Economy is doing to share control   over inflation with the Central Bank, in particular, through   subsidizing the import of various goods and activities. In this  regard, he recalled his experience as the head of a supermarket chain  in the early 2000s, when a sharp revaluation of the  dram was  registered on the market. "I witnessed how our producers and   exporters suffered during this period, how locally produced products   on store shelves were replaced by goods from Russia, Ukraine, Turkey,   etc.," he said. Consequently, Kerobyan stated that as long as he  holds the post of  Minister of Economy, he cannot allow the  repetition of past scenarios, referring in this context to the  industrial development  policy adopted by the government.

So far, the government has not taken any tangible steps in this  direction.