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The continued upgrade of Armenia’s sovereign rating should also contribute to a certain reduction in interest rates, although they are influenced not only by domestic factors in Armenia but also by global economic factors.
Armenian Prime Minister Nikol Pashinyan made the remarks during the National Assembly-Government question-and-answer session.
Hayk Farmanyan, an MP from the Strong Armenia faction, noted that around $7 billion of the Armenian banking system’s loan portfolio consists of consumer loans to individuals. In his assessment, a significant proportion of the population is financing current consumption through borrowing.
The MP also noted that comments by the Central Bank Governor about a possible increase in lending rates had caused a sense of panic among citizens. He asked what steps the Government was taking to prevent a further increase in the population’s debt burden.
Pashinyan disagreed with treating the entire volume of consumer loans as the population’s debt burden.
“If a person has a deposit of 5 million drams in a bank and wants to buy a refrigerator costing 500,000 or one million drams, I don’t think they would decide to terminate the deposit agreement, withdraw that money and use it to buy the refrigerator. Of course, I agree that a certain segment does indeed buy things with borrowed money, through loans, but I don’t think we can attribute the entire figure you mentioned 100% to such a situation,” the Prime Minister said.
According to him, over the past eight years, the quality of loan servicing has improved, while the amount and share of non-performing loans have decreased significantly.
Pashinyan stressed that the ability to obtain a loan can itself be an advantage for citizens whose credit histories are considered reliable by banks.
“The fact that a person can go to a bank and obtain a loan, and that the bank considers their credit history reliable, is also a certain advantage for that person, because they have the ability to take out and repay that loan. Naturally, there are certain risks involved, but it would not be right to portray this entirely in a negative light,” he said.
Turning to interest rates, the Prime Minister said the issue is regularly discussed within the Government in a working format.
“We also believe that, amid the continued improvement in Armenia’s sovereign rating, an upgrade of the sovereign rating should also lead to a certain reduction in interest rates. But we cannot ignore the fact that, at the same time, global developments are taking place that are leading to inflationary pressures,” Pashinyan said.
The Prime Minister cited the Russia-Ukraine conflict and the situation in the Strait of Hormuz, stressing that interest rates are not determined solely by Armenia’s domestic factors.
According to him, the Government is working in this direction.