YEREVAN, January 15. /ARKA/. International Monetary Fund (IMF) has elaborated three possible scenarios of Armenian financial system’s default based on stress-test of liquidity and paying capacity of Armenian banking system. The projections (baseline, moderate and severe scenarios) are included in the report on Armenia’s financial stability published on IMF’s webpage.

According to the baseline scenario, probability of default is assessed at about 2.4% for 2013 and is expected to go down to 2.1% by 2016.

Under the moderate scenario, probability of default is about 4% in 2013 and will remain almost unchanged – between 3% and 3.5%, in the next three years.

The most pessimistic, severe scenario says probability of default is 5.5% in Armenia in 2013 and will reduce to 4% by 2016.

These stress tests are based on liquidity and solvency assessment. For example, liquidity stress test includes such indicators as “rapid withdrawals of resident and nonresident deposits”, “Parent banks
withdraw their deposits and loans to their subsidiaries and branches in Armenia”, and etc.

At the same time, solvency stress test takes into account possible events like combination of factors having effect on GDP growth, and etc.

According to monthly review of Armenia’s Central Bank for November 2012, ratio of resident deposits in foreign currency to money supply was 45.2% and that of time deposits in foreign currency to overall time deposits was 73.7%.

At the same time, against the background of the default projected in the USA in February, if the Congress does not agree on the national debt threshold, dollar may depreciate, which will lead to destabilization of Armenian financial system in general.

The current US national debt limit, according to US ministry of finance, is 16.394trln dollars. The country hit this debt ceiling on December 31, 2012, but the ministry of finance took measures to continue servicing the debt. The administration and the Congress should reach an agreement about raising the limit before March 1, otherwise the country will fail paying the bills.–0--