Armenia’s Central Bank Raises Interest Rate Again

A statue symbolizing the dram, outside the Central Bank building in Yerevan. (Photo: Photolur)

YEREVAN (RFE/RL)—The Central Bank of Armenia (CBA) raised its benchmark interest rate for the third time in less than two months on Tuesday despite its assurances that the domestic financial system is stabilizing after sharp exchange rate fluctuations observed late last year.

During a meeting of its governing board, the CBA set the refinancing rate at 10.5 percent, up by 1 percentage point.

The minimum cost of borrowing in Armenia stood at 6.75 percent as recently as in December. It was raised to 8.5 percent on December 23 following a considerable depreciation of the national currency, the dram, resulting from falling remittances from Russia. Although the dram’s exchange rate remained stable in the following weeks, the refinancing rate reached 9.5 percent on January 21, with the CBA citing “high inflationary expectations” fuelled by the weaker dram.

Explaining the latest rate increase, the CBA said that consumer prices in the country went up by an average of 2.5 percent in January, translating into an annual inflation rate of 4.3 percent. It forecast that inflation will rise further in the coming months before easing by the end of the year.

In a statement, the bank said that the effects of the exchange rate fluctuations, which disrupted wholesale trading and banking operations in December, are now being “gradually neutralized.”

Some analysts said the fresh rate hike means that the authorities in Yerevan are still worried about a renewed weakening of the Armenian currency. “Since the Central Bank’s main mission is to keep inflation under control, it is artificially raising the cost of lending in order to prevent the dram’s depreciation,” said Vahagn Khachatrian, an economist affiliated with the opposition Armenian National Congress party.

Armenian commercial banks also seem to lack confidence in the strength of the dram. Many of them are said to have significantly limited lending or even frozen it altogether.

Gevorg Gharibian, a farmer from the southern Armavir province, on Tuesday claimed to have been unable to secure a bank loan worth only 200,000 drams ($420). He said he has approached five banks and been turned down by all of them on the grounds that the dram’s exchange rate is now unpredictable.

“They know that I repaid 3.5 million drams in loans last year but still won’t lend me 200,000 drams,” Gharibian told RFE/RL’s Armenian service (

“We have stopped extending loans,” confirmed an official at one of those banks.

“We do accept loan applications. It’s just that the consideration process now takes a bit longer,” insisted a representative of another bank.


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  1. Hratch said:

    Prudent move considering that the sanctions on Mother Russia are just going to get tighter and tighter. As the saying goes, when Mother Russia sneezes Armenia and all her other oblasts will catch pneumonia.

  2. Hratch said:

    Soon the Dram/Tram as well as the Ruble/Rubble will disappear. They will be replaced by a common EEU currency which will be adorned by images of Tsar Putin. This plan has already been floated around by some member oblasts including Belarus’ puppet-president. As a consequence, national symbols of member oblasts will be tossed aside for the glory of the newly resurrected CCCP regional order. Armenia’s mere 20 years of independence will cease to exist for all intent and purposes. Soon the issuance of a common passport, free flow of peoples, unified army and single foreign policy will enter the equation to fully implement the hegemonic design. The EEU is the opening salvo for another 70 years of enslavement to serve the insatiable appetite of the bear. One by one all former Soviet states will be blackmailed back into the fold. Those who stand for their rights will follow the fate of the Crimea, Ukraine, Georgia and Malaysia Airlines Flight 17.