Growth of dollarization weakens Armenian dram

Growth of dollarization weakens Armenian dram

news.am
June 10, 2012 | 10:01

YEREVAN. – Due to the weakening of the Armenian dram, dollarization
growth is observed in the Armenian financial market.

Banks have raised interest rates on deposits and loans to AMD while
USD loan rates have not changed. Enterprisers prefer to do
transactions with the US dollar as it has got a more reliable
`reputation’. All Armenian citizens who have taken loans with the
dollar and are paying them off currently incur significant losses.

To note, the growth of demand for loans in US dollars, too, in its
turn, contributes to the weakening of the dram, as the business
creates additional demand for currency. One of the negative
consequences of the unpredictable weakening of the dram is the growth
of dollarization – reducing confidence in the dram as a long-term
tool.

From: A. Papazian