Floating exchange rate will promote economic growth in
Armenia, CBA deputy chairman says
04-03-2009 23:00:00 | Armenia | Economy
YEREVAN, MARCH 4, NOYAN TAPAN. By returning to a floating
exchange rate policy on March 3, the Central Bank of Armenia
(CBA), on the whole, paid attention to economic growth. In the
opinion of the CBA, the floating exchange rate will become a
stimulus for economic growth, and Armenia will have an economic
growth of several percents in 2009, whereas the IMF has forecast
an economic decline, the deputy chairman of the CBA Vache
Gabrielian stated at the March 4 press conference.
To recap, when the CBA adopted an inflation targeting
policy, it was announced that it was done due to the necessity
to protect the interests of those who receive their incomes in
Armenian drams, that is, who make the majority of the Armenian
population. However, according to the CBA, on March 3 the
exchange rate was 372.11 drams a dollar, exceeding the exchange
rate of the previous day by 66.36 drams, as a result of which
consumer prices, in particular, prices of imported foodstuffs
and fuel for vehicles have risen by 20-30%. In response to the
question: "What will be the price of shifting to a floating
exchange rate in terms of forecasting expectations about
promotion of exports and investments and creation of jobs?", V.
Gabrielian replied that perhaps it would not be correct to
connect the problem of protecting the interests of those who
receive incomes in drams (the problem in this wording) with
inflation targeting.
He added that by the law, the CBA has to ensure price
stability which presupposes a low and stable level of inflation
which must be expressed in drams. The CBA does not calculate a
price growth in dollars because the dram is the national
currency, and inflation is calculated by the consumer basket in
drams. In this sense, inflation targeting has not made any
change. "We will continue calculating inflation in drams. In any
case, regardless of whether our policy will be conducted by
means of monetary aggregates or inflation targeting, it will be
aimed at combating the inflation in drams," the CBA official
stated.
In his words, "naturally when the exchange rate of the dram
against the dollar has risen, it is more difficult for those who
receive their incomes in drams, but all our calculations of
inflation are related to the consumer basket in drams".
It should be mentioned that the IMF and the World Bank have
expressed their postive opinion about the CBA's return to a
floating exchange rate regime.