Media: Armenia's currency reserves rapidly shrinking

According to an article published by Armenian publication 168 Zham, Armenia's international currency reserves, which had increased before the Russian-Ukrainian war, are now rapidly shrinking.

Over the last year, the reserves have shrunk by more than 12 per cent, Caliber.Az reports citing the newspaper.

Although Armenia is not currently in the danger zone in terms of reserves, if the current pace continues, it may soon approach it. Additionally, some indicators over the last year or two have caused concerns about the level of reserves.

"According to the data published by the Central Bank, they totalled $3 billion 601 million at the end of December last year. Compared to the same month last year, the reserves decreased by almost $510 million.

This is a huge reduction in reserves, which also carries risks. Especially when you consider the uncertainties and risks that exist in terms of financial and economic stability.

There was a time when reserves increased in the short term, Nikol Pashinyan was quick not only to call it a historical record but also considered it an important factor in raising Armenia's economic rating. He said that international pressure is an important financial and macroeconomic factor. Also thanks to them the rating of Armenia's economy is constantly rising. Now, when the reserves are shrinking at a record pace, he forgot to say how it affected the rating of Armenia's economy.

Naturally, Nikol Pashinyan will not touch upon this issue, otherwise, he will have to say that the reduction of reserves has created dangers for the rating of Armenia's economy, which is the leader of world growth.

It should be noted that before the Russian-Ukrainian war and the well-known increase in foreign trade, Armenia's foreign currency reserves provided at least 5 months of import coverage. However, according to the data from the end of last year, this period has rather reduced, it is at the level of 3.5 months. On the one hand, the reduction of reserves contributed to this, on the other hand, the sharp increase in the volume of imports related to re-exports.

Of course, the Central Bank can say that this is not a mandatory indicator for them, but all over the world it is considered a benchmark. And if you look even over two years, this indicator has deteriorated significantly. Imports have increased several times, and reserves have increased by only 372 million.

As a result of the reduction of currency flows, the risks of devaluation of the national currency in the foreign exchange market have increased. The contraction may intensify soon. Although the Central Bank has significantly reduced interventions in the foreign exchange market in recent years, it still has to do so from time to time to smooth out sharp fluctuations and restore balance. Otherwise, it will be impossible to avoid shocks," the article says.