YEREVAN, March 13. / ARKA /. The share of deposits in Armenian banks kept in US dollars grew last year by 4.2 percentage points from the previous year to 63.9%, the Central Bank said in its monthly bulletin for December 2014.

The growth was prompted by a sharp devaluation of the Armenian national currency, the dram, in the last months of 2014 making people to convert their savings from the national currency to hard one.

The trend affected largely demand deposits whose share in 2014 December fell by almost 10% to 180.5 billion drams, while demand deposits in USD grew by 6.6% to the equivalent of 846.7 billion drams.

According to the Central Bank, the share of private demand deposits in USD in 2014 December made 74.4% of the total deposits growing by 3 percentage points from the previous month and by 3.2 percentage points from December 2013.

The same trend was observed in 2009, when the share of deposits in USD grew from 44.1% in 2008 to 66.6% in 2009 March. That happened right after the Central Bank shifted to the so-called floating exchange rate policy. By the end of 2009 this indicator reached the historical high of 68.6%.

In order to stabilize the foreign exchange market, in 2014 December the regulator increased the mandatory reserve requirement in foreign currency to 24%. Prior to that the minimum amount of reserve requirement for Armenian banks was 12% - 9% were to be in drams and 3% in US dollars. Today, the reserve requirement is lowered to 20%, but it still remains high.

This decision caused a shortage of dram liquidity in commercial banks, resulting in higher interest rates. Thus, interest rates on deposits in drams rose to 16-18% from 13-14% a year earlier.

Experts believe that large amount of imports (about 45% of GDP), private money transfers (17% of GDP) and high inflationary expectations of the people are  the main obstacles to cutting the level of dollarization.-0-