Managing inflation through exchange rate is dangerous - former minister says

YEREVAN, November 11. /ARKA/. Former Armenian Finance Minister Vardan Aramyan believes that managing inflation through the exchange rate is dangerous.

According to him, in the short term strengthening of the currency is good from the society's point of view, as prices of imported goods are restrained, but questions arise about what will happen in the long term and how stable the revaluation is.

"We need to understand where the world is and where Armenia is. The overall trend of the DXY index, which calculates the ratio of major currencies to the US dollar, has been strengthening since March to this day," he said, adding that the opposite is happening in Armenia.

In an interview with Civilnet.am. Aramyan explains that the Central Bank is guided by the quantitative management policy.

He says the dispute between the regulator and the government is centered on quantitative indices: If, for instance, the regulator buys $300m from the market, then the government must use two instruments- taxes and bonds to withdraw the same amount from the market.

In this regard, Aramyan says that the inflation targeting tool, which the previous governments and the Central Bank used to be guided with provided a much better approach to forming a stable base for long-term economic growth than quantitative management.

In this context, the former minister explains the surplus of dollars in the Armenian market by the arrival of thousands of Russians, who brought with them millions of US dollars. According to Aramyan, Armenia should better coordinate its monetary and fiscal policies.

The Armenian government’s growth projection for 2022 is 7%; the inflation rate is 4% (±1.5%). Armenia's economic activity in the first 9 months grew by 14.1% compared to the same period in 2021.

According to the latest forecast of the Central Bank, the country's economy will grow by 12.9% and inflation will be about 10% by the end of the year. -0-