Smbat Nasibyan, having an extensive experience in the banking industry, says, “After the dollar rise, there is a “war” situation in Armenia’s economy.”
Armenia’s population is getting poorer hour by hour because of the dram devaluation. Yesterday evening, 1 dollar was worth 580 AMD. “Armenia ‘s economy has appeared in a “war” situation, and it requires a consolidated solution to come out of the situation,” says economist Smbat Nasibyan, also the founder of “Converse Bank”, also former president of the Board of the Bank, who worked in the bank industry since the Soviet times, in the conversation with “Aravot”.
Mr. Nasibyan estimates Armenia’s current economic situation a dramatic one. “Due to objective and subjective reasons, Armenia has appeared in a bad shape, and there are several options to get out of it, but to come out with minimal losses, the best option is to leave for the market to be self-regulated. The worst are the non-market mechanisms. Dollar-dram exchange rate should be left for the market to decide, we all will become poor, it is painful. Life has shown that despite the administrative mechanisms, eventually, it has turned out what the market has dictated,” says Mr. Nasibyan.
The economist mentions that the Central Bank seems has not elaborated a strategy, and if available, it is obligated to come up with a statement and honestly tell about its actions. To our question that during the day, the banks are selling dollars and euros for a few hours, so whether they have a deficit of foreign currency, Mr. Nasibyan says, “The banks have money, but it’s not their money, it’s the amount of their clients, they have dollar depositors, but they also have dollar loans. If they are demanded to sell foreign currency, they enter into a short position, the changes in the exchange rate bring them to “minuses”. It is clear that they do not want to have losses, therefore, they will take every step. If the price of the exchange rate rises daily, and they sell the dollar at a high cost on the specific day, then, the next day, they will buy at a higher cost, therefore, they do not make transactions to avoid the losses. The banks still do not know what the CBA will decide and do.”
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Mr. Nasibyan says that the Central Bank should prevent the current panic. “We must not repeat the mistake of 2008, we need to choose a model that would be less harmful. In other words, should we go to reduction of standard of living of population and purchasing power, or try to use administrative levers and make interventions, which would be much worse. The Central Bank should be transparent in telling about its next steps. Russians have calculated their macroeconomic indicators in the event of such phenomenon, they have elaborated several mechanisms and are working in this direction. Now, we do not know what strategy is elaborated by our government or whether they have it or not.”
To our question that the Central Bank had announced that the appreciation of the dollar would boost the export, given the volumes and directions of our export, so whether this stimulus will work, Mr. Nasibyan says, “This is the elasticity, the correlation between the exchange fluctuations and the price index, unfortunately, it is mutually connected in our country, which is not good, but in our country, the consumer goods are mainly imported, domestic production is small. We had and still have to do everything it replace the import by domestic production so that such shocks would not be painful. We had a great potential in agriculture, which was not used, the simplest example, wheat production. Simply to say, our economy should be diversified and not be so dependent on the Russian market. Our available production depends on the energy prices, this creates a production competitiveness problem. We, unfortunately, buy gas from Russia in dollars, and if the agreement were in Russian ruble, now we would be able to buy gas at a cheaper price, and this would affect the local production positively.”
Referring to the rise in the dollar, Mr. Nasibyan says that the fair exchange rate for one USD would be 550-600 AMD, and if the price rises higher than this, the Central Bank should use the leverage. In the event of 550-600 exchange rate specified by Mr. Nasibyan, the budget will be performed, taking into consideration that the import will be reduced due to the rise of the dollar, which plays a crucial role in the economy. Few days are left for Armenia’s accession to the Eurasian Economic Union. In response to our question of how it will affect the current exchange rate situation, Nasibyan says, “Whether we join the Union or not, the dram devaluation was to happen. By joining the Union, it would be possible to buy some products in Russian rubles. However, Russia has decided to increase the price for wheat. It would be better for our government to apply to Russia to reconsider the agreement, and make the transactions by their prices, in Russian ruble.”
Nelly BABAYAN
