In case of any changes in the market of prices,
the CB always states, that according to the law, their obligations are to
provide the due marks of prices sustainabiliy and inflation. As a rule, the CB
states marks close to the planned ones in their reports to show, that their
work is effective. Anyway, in connection with the USD inflation, which started in
2004, the society suspects in the CB. Probably one of the reasons is the fact,
that in difference with the official reports about low inflation, the prices
for some goods rise faster than had to do so according to those reports, which
is very clear to people. How can you explaion this contradiction?
– One
of the important conditions for the situation objective assessment is to use
the same terminology. So we will be
short in presenting the present problem contradictions. So, the main goal of
the CB to provide prices sustainability means to provide some frugal increase of
prices. In other words, the goal of the CB is not to stop the prices increase,
or, moreover, assist falling in prices, but it works to provide prices little
increase according to the current year program, for example prices increase not
more than 3 %. Though generally inflation means prices increase, in practice in
order to calculate the real prices changes in comparison with the prices of the
previous year (the previous or another basic year), it is important to fetch
out a group of goods, to which prices changes most of the people are careful. Of
course, this will show the goods most of the people use, together with its
quantities. For this purpose in order to calculate the inflation basket of
goods is used, which contains 400 types of goods in Armenia. So, the idea of 3%
inflation means, that in that year the prices for basket of goods will be
increased for 3 %. Actually it doesn’t mean, that the price for each product in
the basket of goods was increased for 3 %, and even more, it doesn’t mean, that
this kind of increase concerns the other goods, which are not in the basket of
goods: those prices can be both increased very fast, stay the same or made
down. So, if a person use is much different from the basket of goods caclulated
for the medium citizen, or this person uses the same things, but with different
quantities, for example the person uses less bread but more vegetables, his
private basket of goods prices may differ much from the official inflation
mark.
– Do
you agree with the assessments, that the inflation of AMD will make the society
distrust the AMD. You always say, that in Armenia not only the economy is
“dollarized”, but also the way of thinking. With this purpose the CB makes some
propaganda, but it seems, that the ways of thinking of the society doesn’t
change much. Don’t you think, that “dollarization” of our economy is more
connected with the internal relations than with the way of thinking. And what
kind of influence will “dramization” have on the way of thinking and on the
foreign rates exchange?
– Of
course “dollarization” is based not only on the way of thinking of the society,
but also on the economical relations in the society: there are a lot of
armenians, most of whose income is in USD and made by bank transfers, and still
there are a lot of cases of using USD in their calculations by violating the
law. Anyway, the fact of not seeing tendence to “dramization”, is just the wish
not to see it, because it is real. From the point of view of the medium family
now in Armenia
less economies exchange their money to USD, because in the scopes of the law,
they have to make their expenses in AMD, and besides that, in case the foreign
currencies had tnedence to development then, now people realize, that those
currenmies can also go down. USD is not an exception either. Anyway, to change
the way of thinking, even in case of having the due premises, first of all
needs time and it is possible only in case of being careful and patient.
Concerning the changes of currency exchange,
first of all this will influence on the results of the economies involved in
foreign economical relations, but from the public point of view, the most imprtant
thing is the spending power of the national currency. Speaking roughly, if you
live in Armenia, you get your salary in AMD and spend your money in the same
country, for you the balanced changes of your salary and the prices is more
important, and the differences in currency exchange can be considered as
changes in the result of the supply and demand balance point changes of the
foreign currency. For example, in 2002 the exchange rate for Euro in connection
with USD increased for 16 % in the international market, and in 2003 – for
about 20 %, and in 2004 – for 6 %. And during the first week of this year from
the highest hystorical rate, 1,3666 USD, came down up to 1,3030. These kind of
changes became a subject for discussions of specialists, but from the public
point of view, these were less imprtant than, for example, the high level of
unemployment.
– Though
today the attention of the public is concentrated on AMD inflation, both the
experts and the citizens speak about different concepts of USD inflation, which
was before the AMD inflation. I.e. the society didn’t consider right your and the
CB explanations about this. Even some speak about “orgonized” mechanisms of USD
inflation, and according to them, this had a purpose of supporting the big
importers in their business, in which result they got super-profit. Please once
more answer this question, and also, if it is possible, present some valuable
facts, which can decline the the valuations, that the CB had intentions to
orgonize this, and which was nearly approved also by the head of the
International Monetary Fund James Maque.
– Of
course it is clear, that the sustainability of the national currency supports
its spending power, thus increasing the importers’ income, and in case of the
national currency inflation increase – the exporters’ income. Generally the
change of an economical mark changes the income of a group in fovaour of
another group. For example, the unpredicted high inflation is good for debitors
and is not good for creditors, because the returning sum has different value
than before, and the bank can not take care of its risks by increasing the
interest rate. High interest risk is not good for people economizing and is bad
for the people making investments. We can continue this long. But the fact,
that an action is good for a group or bad for another group, can not be a
basement for coming to a conclusion, that this was orgonized by that group.
Everyone must understand also, that it is much
easier to make sensation announcements than to make serious economical
analysis, even more, in case when the demand for sensation announcements is
more than for economical analysis results. But together with the USD price
increase, that we had these days, the concept of intended inflation by the CB
is baseless.
As for
the IMF approachment, this institution likes our CB activities, which was noted
in different reports.
– In
2004 the CB had losses for 16 billion AMD, which, as you noted once in your
speech, wasn’t mostly coused by USD inflation. According to some predictions,
the losses of the CB will be more this year for several times: about 50 billion
AMD. According to the information we have, with this purpose the CB has applied
to the government, asking to issue government obligations with the due quantity.
Are these predictions and the infoprmation true? And if yes, what is the
reason?
– As
the CB doesn’t make exchange rate predictions, which was mentioned for many
times, it can’t predict the exact amount of the losses occurred in the result
of these changes either. Concerning issuing obligations by the government with
the purpose of covering the losses of the CB, according to Clause 11 of the
“Law about the RA Central bank”, in case the loss in the balance of the Central
bank exceeds the savings reserves at the end of the year, the RA government
provides the CB with unlimited duratation government obligations with the
exceeding quantity and with the market interest rate, as an investment in the
CB capital. This mechanism is called as insuring the CB authorized capital
stock from decreasing, which is considered as the property of Armenia and can
not be expropriated in any way against the obligations of RA.
–Several
months ago there were offers, made by some businessmen, to leave the policy of
floating rate and make fixed rate policy. At that time you noted, that the CB
made this floating rate policy according to its law provisions. Has the CB made
discussions about changing it legislation after the changes in the foreign
exchange market during these 1-1,5 years (sometimes unpredictable changes)? Are
there any calculations about the economy losses after these changes and are
there any valuations about whether the policy of fixed rates can be more effective
now, which was considered as non-effective before? And generally were ever
discussions made about changing the “preventing legislation” with any “post
factum” legislation?
– As
it was several years ago, now the CB considers its main goal to provide prices
sustainability. And in connection with this, starting from January 1, 2006, the
CB intends to change its policy of money capacity control with the policy of
having the inflation regulation as the main goal, which is a more effective
mechanism to provide the due inflation rate.
It is
important to understand, that the effective providing of the due inflation
level and the policy of exchange fixed rate are in contradiction with each
other, which can not be fulfiled in an effective way together. Those
authorities, which have these kind of two goals together, at least don’t do
well in the fulfilment of one of these two and at least chose one of them. And if in case of the floating rate policy
the affect of the rate change are the the missed incomes of importers and
exporters, or the “super-profit”, about which it is spoken much, in case of
fixed rate policy first of all the affect will be on our country international
treasure, which actually, together with some other important things, are our national
wealth.