Summer has made the social and political life of our country slow down. August is the month for vacation in Armenia. Only two fields of Armenian economy work intensively; agriculture and construction. This is based on the season. Due to the current situation in Armenia’s financial market of Armenia, we may assume that the Central Bank works intensively too. The changes in the foreign exchange rates were unprecedented. About ten days ago we could explain this process based on events going on in the world; USD rate inflation in the international market coincided with Armenia’s inflation rate. At the beginning of this week, that rate started going up in the international market, however, it continued to go down in the Armenian market. In that period the CB gave information for May on its web site. It was expected to find an explanation concerning the fall of foreign currency prices in the official document. In spite of that, bank statements show something else. The currency price has been going down for the past three years already. With that said, we may assume that the banking system of the country might go through serious reforms. However, there are still many high risks for Armenia’s national currency. Banks ask for more interest rates for credits in national currency than foreign currencies. According to the CB, in May banks provided credits in the national currency for 15,5%. As for foreign currencies, they provided credits for 13,9%. As for people, it is the vice versa in Armenia; they gave cheaper deposits in the national currency. Since they have to make transactions in national currency for purchasing furniture and other things, they take their loans in AMD. Banks get extra profits due to this fall and deflation of the national currency.
The figures and marks of deposits show that the national currency has a higher risk than other currencies. Accordingly, banks offer higher interest rates for deposits in foreign currencies than for deposits in AMD. There are 21 trade banks in Armenia. In May they offered 6,5% interest rate for deposits in national currency, and 4,5% – for USD. As for the national currency, banks have more problems because its prices are growing day by day. In spite of that, banks offer higher interest rates for those deposits. According to analyzers, this is only due to the internal policy of our country. Both the CB and the Armenian government strongly control the Armenian financial market. During the past couple of years, the government issued governmental obligations and took amounts of money out of the economy for some time. Now the CB has joined them too and it issues its own obligations. Due to this and several other such tools they can easily control the financial market of our country. As for trade banks, they often have a shortage and need extra money. Based on a schedule formed beforehand, the CB and the government are going to issue obligations worth 10 and 4 billion AMD respectively in August. After the issuance of the mentioned obligations, the capacity of AMD will be taken out of circulation. According to economical rules, it will support deflation of the national currency. This may make it so the national currency becomes more expensive due to a good economical policy. In spite of that, bank statistics shows that both natural and judicial persons prefer keeping their savings in banks in foreign currencies. According to many analyzers, the reason people don’t trust the national currency is due to the fact that its prices are growing. In fact this imitation of AMD deflation is inflation. Last year the official statistical services said that in that year inflation covered 0,2%. As for the statistical data of this year, the prices in May have increased by 5,6% compared to those of December of the previous year. On May 31, the CB board confessed that the inflation marks corresponded to “the planned inflation mark scenario that should not increase 3%”. Based on the previous experience, we may assume that statisticians may draw perfect figures of development and phony figures of inflation like the CB this year too. The economy makes this problem more complicated. First, we’re approaching the end of the summer already and it’s clear that the inflation rates are not as high as we expected. Agriculture plays a key role in Armenian economy. This year things are different for this field; the high season started soon and now prices for produce are higher than expected. Agricultural products have never been so expensive in Armenia. Accordingly, AMD deflation can’t be explained by any policy of keeping prices from falling. There is much more negative influence on our economy than there seems to be.