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Armenia experiences drastic decline in foreign exchange reserves

28 June 2019 15:10 (UTC+04:00)
Armenia experiences drastic decline in foreign exchange reserves

By Abdul Kerimkhanov

Speaking at the recent investment forum in Dilijan, Armenian Prime Minister Nikol Pashinyan made a statement that shocked Armenian society.

Based on the Central Bank data, Pashinyan boastfully said that Armenian foreign exchange reserves reached $171 million. However, a question arises, what was the previous level?

Previous data published by the Armenian Central Bank show that at the beginning of 2019, the foreign exchange reserves of the Central Bank were about $1.9 billion. If they have now reached $171 million, then this is a catastrophic recession, a reduction of 11 times.

More likely, Pashinyan named the wrong figure, reducing the figure given by more than 10 times. Such a probability exists as the Armenian PM often finds himself in such absurd situations. However, given the fact that Pashinyan spoke at a business forum where serious people gathered and nobody corrected him, it means that the catastrophic data of Armenian foreign exchange reserves is true.

A much more serious mistake is that the Prime Minister tried to show this figure in the context of positive economic trends. Because a sufficient amount of foreign exchange reserves does not mean that this money is circulating in the country's economy. These are reserves, for example, allowing the Central Bank, if necessary, to intervene in the foreign exchange market, to avoid a currency deficit, thereby ensuring stability in this market. This is a kind of security airbag for the Armenian currency, a guarantee against its collapse in case of a significant reduction in the inflow of currency into the country, for example, due to the decline in exports and foreign investment.

The attempt of Armenian PM to present the foreign exchange reserves as an achievement is another absurdity. Growth and reduction of foreign exchange reserves, according to the Central Bank, are tied to the seasonal factor. At the beginning of this year, an 11 percent decline in reserves of the Central Bank was recorded.

Commenting on this situation, the Central Bank spokesman said such financial movements are seasonal in nature. He also added that this seasonality is expressed both at the end and at the beginning of the year.

If to keep in mind the seasonal factor, then the figures cited by Pashinyan have no meaning.

Such a language may sound creative and beautiful for someone, but, in fact, it does not reflect the real picture. For the economy, circulation of not the reserve money, but the investment money is important, to ensure the production development, the solution of employment problems and economic growth. This is a vague dream if to take into account that both in foreign and domestic politics, the current Armenian leadership constantly faces failures.

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Abdul Kerimkhanov is AzerNews’ staff journalist, follow him on Twitter: @AbdulKerim94

Follow us on Twitter @AzerNewsAz

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