YEREVAN, July 29. /ARKA/. Chairman of the Central Bank of Armenia Martin Galstyan explained Tuesday the decision of the Central Bank Board to keep the refinancing rate unchanged, at 4.5%.

The Central Bank Board at a meeting on Tuesday decided to leave the refinancing rate unchanged, at 4.5%. The rate of the Lombard repo provided by the Central Bank is 6%, and the rate on funds attracted by the Central Bank from other banks is 3%.

Galstyan said the rate is short-term and the main functions of the rate are weekly REPO transactions.
He reminded that ahead of the crisis in Armenia, the central bank announced that it would provide the necessary liquidity to banks both in drams and foreign currencies.

“In this regard, we did not limit the volume of REPO transactions, the volume of which at some moment increased 4 times, compared with the March indicator,” Galstyan said at a press conference on the monetary policy.

He said that the central bank’s previous decision to lower the refinancing rate by 0.5% had an impact on the financial market, in particular, along the entire length of the curve of yield for government bonds.

“As for the banking system, it should be noted that the volume of lending in Armenia is growing, but amid uncertainty in the economy, we do not yet see the perfect work of the transition mechanisms, which is essentially typical for almost all countries of the world in the current situation. There are accumulated risks in the real sector of the economy, and banks can be more careful in their lending policy,” Galstyan said.

In his words, some banks now offer lower rates on subordinated loans, which is due to the unprecedentedly low rates in the world financial market.

“As a result of the change in rates during the year, the loan portfolio has grown by almost 200 billion drams - some of them are loans to individuals, where we do not notice significant changes in rates, and the rest, about 90 billion drams, are preferential loans from the government under assistance programs. It is difficult to say that the latter are formed on the basis of market interest, since they are aimed at stimulating and promoting business,” Galstyan said.

Before that, the central bank changed the refinancing rate on June 16, 2020, lowering it by 0.5 percentage points to 4.5%.

On April 29, the National Assembly of Armenia approved the coronavirus-prompted revision of budgetary indicators. Taking into account the unfavorable impact of the situation withCOVID-19, the budget forecast for GDP was lowered to a decline of 2% from the 4.9% growth projected earlier, and the deficit was increased to 340 billion drams, or 5% of GDP (previously 2.3%).–0--