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CHECKING INFLATION: CENTRAL BANK'S MONETARY POLICY QUESTIONED IN PARLIAMENT
ECONOMY | 11.06.13 | 15:31
Photolure
By SIRANUYSH GEVORGYAN
ArmeniaNow reporter
The first day of the National Assembly's four-day session this week
was marked by heated debate over the Central Bank's 2013 monetary
policy program. It drew criticism not only from opposition lawmakers,
but also from some pro-government members of the legislature.
The point is that according to Central Bank estimates, the increase
in natural gas tariffs may entail an inflation of only 2.5 percent,
while many experts believe that the inflation rate may be much higher,
considering the fact that higher gas and electricity tariffs will mean
an inevitable rise in prices for some essentials and consumer goods,
which will in turn be aggravated by a higher cost of agricultural
production conditioned by an expected unsuccessful agricultural season
in the wake of a series of hailstorms.
"In the first half of 2013 the 12-month inflation will, to some
extent, accelerate and by late June will be in the upper part of the
permissible band. The inflationary environment will be extended also
because of the possible increase in prices of agricultural produce in
the wake of the damage caused by hailstorms and from the third quarter
also by the possible revision of energy tariffs," said Central Bank
governor Artur Javadyan. "In this situation in order to mitigate the
high inflation and reduce its secondary effects as well as to anchor
inflationary expectations the Central Bank will review its monetary
policy directions, raising the refinancing rate, and then, after
the specification of inflationary expectations, will again lower the
refinancing rate. As a result, beginning from the third quarter of 2014
inflation will slow down and will fluctuate within the projected band."
This announcement was met with harsh criticism from some lawmakers.
While the ruling Republican Party representatives think that the
Central Bank has not correctly estimated the financial risks,
opposition Armenian National Congress party faction member, former
Prime Minister Hrant Bagratyan stressed in his speech that the
financial system in Armenia does not change, nor does it develop.
"They seized the Central Bank by the balls and won't let it go so
that change could take place in the financial system," Armenia's
former prime minister asserted.
According to him, the Central Bank's monetary policy does not
contain deep and thorough analysis. Bagratyan is also concerned by
the circumstance that a large percentage of deposits is collected
from regions and then is concentrated in capital Yerevan. "Banks
borrow money from villagers, ordinary people and concentrate it in
the hands of the rich," he said, stressing that in Armenia there is
no development of stock exchanges and there is no investment system.
Another circumstance that angered the former prime minister is that
the government provides tax incentives to such projects as Dilijan
International School, but small businesses have no such privileges. As
a result, he charged, small businesses leave the country.
Armenian Revolutionary Federation MP Artsvik Minasyan thinks that
the monetary and fiscal policies of the government do not contribute
to the overcoming of economic obstacles, while the declared policy of
economic diversification bears a formal nature. According to Minasyan,
the government and the Central Bank have no idea what is going on in
the economy and keep talking only about a stable banking system.
"A tank is also a solid armored vehicle, but you cannot plough with
it in your garden," he said, calling for a revision of the current
policy to make it targeted and consistent.
Parliament Speaker Hovik Abrahamyan relieved some of the tensions
in the chamber by calling on the finance minister and the Central
Bank governor to take responsible steps adequate to the situation
and through joint efforts find an effective way to solve the problem.
According to the speaker, if long-term loans at low interest rates are
issued to borrowers, it will directly contribute to the development
of the economy, which will in turn reduce unemployment and emigration.
ECONOMY | 11.06.13 | 15:31
Photolure
By SIRANUYSH GEVORGYAN
ArmeniaNow reporter
The first day of the National Assembly's four-day session this week
was marked by heated debate over the Central Bank's 2013 monetary
policy program. It drew criticism not only from opposition lawmakers,
but also from some pro-government members of the legislature.
The point is that according to Central Bank estimates, the increase
in natural gas tariffs may entail an inflation of only 2.5 percent,
while many experts believe that the inflation rate may be much higher,
considering the fact that higher gas and electricity tariffs will mean
an inevitable rise in prices for some essentials and consumer goods,
which will in turn be aggravated by a higher cost of agricultural
production conditioned by an expected unsuccessful agricultural season
in the wake of a series of hailstorms.
"In the first half of 2013 the 12-month inflation will, to some
extent, accelerate and by late June will be in the upper part of the
permissible band. The inflationary environment will be extended also
because of the possible increase in prices of agricultural produce in
the wake of the damage caused by hailstorms and from the third quarter
also by the possible revision of energy tariffs," said Central Bank
governor Artur Javadyan. "In this situation in order to mitigate the
high inflation and reduce its secondary effects as well as to anchor
inflationary expectations the Central Bank will review its monetary
policy directions, raising the refinancing rate, and then, after
the specification of inflationary expectations, will again lower the
refinancing rate. As a result, beginning from the third quarter of 2014
inflation will slow down and will fluctuate within the projected band."
This announcement was met with harsh criticism from some lawmakers.
While the ruling Republican Party representatives think that the
Central Bank has not correctly estimated the financial risks,
opposition Armenian National Congress party faction member, former
Prime Minister Hrant Bagratyan stressed in his speech that the
financial system in Armenia does not change, nor does it develop.
"They seized the Central Bank by the balls and won't let it go so
that change could take place in the financial system," Armenia's
former prime minister asserted.
According to him, the Central Bank's monetary policy does not
contain deep and thorough analysis. Bagratyan is also concerned by
the circumstance that a large percentage of deposits is collected
from regions and then is concentrated in capital Yerevan. "Banks
borrow money from villagers, ordinary people and concentrate it in
the hands of the rich," he said, stressing that in Armenia there is
no development of stock exchanges and there is no investment system.
Another circumstance that angered the former prime minister is that
the government provides tax incentives to such projects as Dilijan
International School, but small businesses have no such privileges. As
a result, he charged, small businesses leave the country.
Armenian Revolutionary Federation MP Artsvik Minasyan thinks that
the monetary and fiscal policies of the government do not contribute
to the overcoming of economic obstacles, while the declared policy of
economic diversification bears a formal nature. According to Minasyan,
the government and the Central Bank have no idea what is going on in
the economy and keep talking only about a stable banking system.
"A tank is also a solid armored vehicle, but you cannot plough with
it in your garden," he said, calling for a revision of the current
policy to make it targeted and consistent.
Parliament Speaker Hovik Abrahamyan relieved some of the tensions
in the chamber by calling on the finance minister and the Central
Bank governor to take responsible steps adequate to the situation
and through joint efforts find an effective way to solve the problem.
According to the speaker, if long-term loans at low interest rates are
issued to borrowers, it will directly contribute to the development
of the economy, which will in turn reduce unemployment and emigration.