Last week the USD has drastically been devalued and reached the rate of 280 AMD per USD. Two days later it again was devalued but didn’t reach the previous rate but only 300 AMD per USD. On Monday the former president of the CB Bagrat Asatryan and former Prime Minister Hrant Bagratyan commented on that and connected this phenomenon with the recent decision of the CB, by which the minimum normative of saving currency in the CB reached 12% from 8%. In case of the AMD this normative remained 8%. This means that during the mentioned period the commercial banks have tried to exchange their dollars into drams so that they would save more money in the CB and not “freeze” their financial means. As a result the demand for the USD in the market was 3-4 times more. That’s the reason why it got devalued. Let’s inform that if on November 21-22 8.7 million and 6.2 million was respectively sold in the stock market of RA then On November 23-26 20.1 and 25.7 million was sold. On Tuesday the head of the Analysis and Politics Department of the CB, Davit Sargsyan held a press conference to respond to Hrant Bagratyan. Prior to that the guest of the Kentron TV was CB board member Vache Gabrielyan. According to the mentioned specialists on Sunday when the banks and their 300 branches didn’t work the currency exchange points were not able to satisfy the demands of the customers. It turns out that quite suddenly all the citizens of Armenia decide to buy drams on Sunday. And the 280 exchange points of the country were not able to satisfy the demand of the population. That is the reason why the price of the USD went to much down. Gabrielyan has even advised us not to exchange money on Saturday and Sunday because the rates are very low. We tried to interview the former Minister of Economy and Finances Edward Sandoyan to receive his comments on this matter.
– Mr. Sandoyan, what is your opinion about the CB decision and was that the reason of the recent USD slump?
– The CB has made a decision to raise the percentage of the saving of the USD up to 12%. Was it right or not? Definitely it was right. But is this tool enough or was it on the right time? Of course not. This decision should have been made in calm conditions and not in rush when the dollar is devaluing anyway. By this decision the CB gives another impulse to the market. Of course, it was not a timely decision. When was this decision supposed to be made? Perhaps 2-3 years ago when the process of the USD slump started. Would this tool be enough if the decision was made three years ago. Of course not because it is only one of the monetary tools. Put shortly, this wasn’t a systematic solution. This will bring certain results but it will meanwhile damage the market.
– But what happened on those days?
– The banks have started to exchange their dollar actives into drams. Part of the population was frightened and ran to the exchange points to convert their dollars into drams. It’s natural that this confusion should have been created. On the other hand we cannot criticize this tool because it is a duly, balanced and classical tool necessary for the market. But I am repeating once again it wasn’t timely. In economics the factor of the right time is very important.
– Does this mean that even this decision of the CB conduced to the rapid devaluation of the USD?
– Of course.
– Mr. Sandoyan, why does the USD devalue in general? The CB connects this factor with the increasing monetary transfers and the society is inclined to think that this is merely an economic speculation.
– We didn’t need AMD revaluation. We carry huge damage as a result and will still do. How should this matter be solved? We annually receive large amounts of currency from our compatriots living abroad. These transfers nourish our economy. Now we have become the victim of those monetary inflows. In fact those are serious sources of our economy. And now we abide in a paradox. Instead of being happy with what we have we suffer because all the transfers abolish our economy. T means that something works wrong. It means that we don’t have the necessary measures to prevent the abolishment of the state. We should be able to strengthen our financial market. Today we don’t have financial institutions besides the banks. There is no capital market, insurance companies, pensioners’ foundation, hypothetic obligations’ market, etc. Those institutions would finance the state economy. The tools of the capital market are only aimed at financing the economy. Of course, this market will develop but the process goes very slowly. I am sure that we lingered the financial mediation armlet development. We should have had insurance market, pensioners’ foundations since long ago. Those institutions would convert the financial resources into long-term projects. And at present we wouldn’t feel this pressure in the monetary market. The CB would easier manage the field. Our problems are very serious and we cannot adjust those with simple solutions.
– Why do we develop slowly? The government constantly praises this process. They always say that they are trying to strengthen the capital market but it seems that nothing is undertaken.
– The monopolization of the economy occupies the position of the financial tools because the monopolists and the ones, who are in the black marker that won’t benefit from the positive process. But without the application of the mentioned tools it will be impossible to have a financial market. On the other hand the monopolized economies don’t have any other demands but to suffice with their own capital. As a consequence of this all the negative phenomena, such as corruption, government’s interference into the business is originated. Besides that the CB can apply only monetary tools; it can only conduct a monetary-credit policy. It cannot do anything else.
– So what is the solution?
– If we had a of certain legislative field created and the government in the person of fiscal bodies and tax collecting entities, the state committee on economic competition could apply non-standard tools during the process of AMD revaluation we wouldn’t have such a situation now. Let’s not forget that in the most monetary country of the world USA during the war period up to 90% of income tax rates were applied. At present most part of the problem is in the competence of the government not the CB. For example, I think that the super income must be taxed at a very high rate. We have importers, whose income during the past 3 three years was increased about three times. Because of the USD devaluation they received super profits by selling their imported goods at AMD. This super income had its reflection in the tax field. Therefore, the state must try to define maximum rates at least temporarily. Let’s say if the income of the imported good is more than 50% then 90% income tax must be paid. Secondly, the state should directly ban the monopolies. The state must ban over 25-30% circulation in the given sector. During non-standard situations it is necessary to find non-standard solutions.
– Mr. Sandoyan, do you think if the state conducted the policy offered by you the USD rate wouldn’t go down like this?
– Of course not. It would devalue to the extent it is devalued in the whole world. I have an impression that our exchange points also have impact on the market. This filed should have been shut down. The system of the exchange points was created to provide the society with a competitive system and also to ensure that this is not the monopolized function of the banks. But I think that we have already overcome this period. At present the USD devaluation first of all affects the exporters. Under these circumstances of course the expenditures are going to increase and the profits to reduce. It means that the exporting companies cannot survive very long. The recipients of monetary transfers also lose a lot of money.
– Our government and especially the CB chairman Tigran Sargsyan often advise our people to make investments and raise productiveness to avoid the consequences of USD devaluation.
– This is a kind wish but not realistic because we should understand that they mean immense investments. And now this advice is not even moral. The business knows what it should do. If they were able they could have done it long ago. By the way, we have enterprises, which have high technologies and re quite competitive.