We are facing serious challenges, and the effectiveness of all institutions should become a tool to overcome them – PM

Prime Minister Nikol Pashinyan visited the Central Bank and participated in the reception organized on the occasion of the coming New Year and Christmas.

The event was attended by President of the Republic Vahagn Khachaturyan, President of the National Assembly Alen Simonyan, Deputy Prime Ministers Mher Grigoryan and Tigran Khachatryan, Chief of Staff of the Prime Minister Arayik Harutyunyan, Cabinet members, MPs, representatives of the Central Bank and financial banking system.

Prime Minister Pashinyan made a speech in which he stated:

“Honorable President of the Republic of Armenia,

Dear President of the National Assembly,

Dear colleagues,

Dear attendees,

Of course, naturally, the year is very complicated and controversial, full of challenges, but since we are in the Central Bank, I would like to summarize the year purely in the logic of the financial and banking system. And if we summarize the results of our financial and banking system, in fact, we can record that we have an unprecedented year. the growths in all indicators are such that can be described in one word, unprecedented in the history of the Third Republic.

Today, the deposit portfolio of our banking system reaches 5 trillion, and this is a very serious indicator. I must also record that we have a very serious and high rate of lending to the economy. Moreover, this year’s index is not unprecedented. I was interested which year we had the highest lending rate in the history of the Third Republic, and to my surprise I recorded that it was in 2020. This speaks of 2 very important things. the first is that as a result of the policies of the Government and the Central Bank, in 2020, the year of the war and the Covid crisis, however, we were able to support the economy to the extent that it was able to absorb an unprecedented amount of loans, which later became the basis, or was the most important factor at the time, that our economy did not collapse due to the war and Covid, but, on the contrary, has become a very important pillar of our future resilience. And I believe that our unprecedented economic growth of 2022 is also somehow connected with this policy, because that lending has finally gathered momentum, and produced concrete results.

The year is also unprecedented in terms of profits of the banking system. This year, the banking system generated a profit of around 187 billion AMD. I have had reasons to address this topic on various occasions, because some people say that it does not matter, it is the result of unforeseen situations. It is the task of the Government, the Central Bank and any system in general to be ready for both the best and the worst developments, where shocks are inevitable, to take these shocks, carry away them, overcome them, and where there is an opportunity, to grasp them. After all, that influx that came to the Republic of Armenia from around 200 countries of the world, of course, happened in many places, but it was the Republic of Armenia that so many people chose to carry out their activities. I think in 2022 we absorbed almost the maximum volume that we could absorb, because if there was more potential, we would have the opportunity to absorb more potential. I am very happy that the approach of the Central Bank is to use those resources generated this year also to increase that potential, so that we are more and more prepared for the next crisis or wave of challenges and opportunities.

In this sense, indeed, the year is very successful for the banking system, but, on the other hand, I want to record something that we have seen in recent years as well. Unfortunately, the banking system also has a certain tradition of creating negativity around itself due to circumstances known to you, especially in the post-Soviet area. Because, understandably, taking money is very easy and pleasant, but returning it, of course, is desirable either not to happen, or to happen under the best possible conditions. And it is clear that as a result of this simple arithmetic, an attempt is made from time to time to form a negative view of the banking system for some political reasons, which we should simply take into account and properly manage this situation.

I am glad that this year, finally, the Government and the banking system are jointly implementing programs of a social nature, and in this regard, I would like to emphasize the system of back-payment for pensioners in case of cashless transactions, and we can already say today that it shows unexpected results even for us. There are even very interesting behavioral changes taking place that also have civilizational and developmental significance. In this regard, I would like us to develop our work with the banking system in 2 directions. First, finally, the public should also more and more visibly record the certain social responsibility of the banking system, the manifestations of which, by the way, I should say, we have seen several times in the last 4 years, and in very large volumes, including programs related to the restructuring of nonperforming loans that have been implemented and so on. But this year, for example, we were also concerned about the quality and rate of loan servicing, and I was very pleased to see that as a result of the discussion with the Central Bank, we are very close to, or at least exceeded the best historical average in terms of quality of loan servicing, and this is a very important indicator too.

Of course, the President of the Central Bank addressed our fears regarding inflation that we had in March-April-May. But at the end of the year, we also finally recorded that the average salary increased 3 times more than the inflation rate. In other words, it is clear that this is not exactly the case in all cases, but in terms of macro-evaluation, I think it is a very clear and visible indicator that we, the Government, the Central Bank and, of course, the private sector, have been able to manage inflation in such a way , that it should not have a significant impact on poverty indicators.

And also returning to the record-high index of crediting in 2020, we return to the criticisms of the Government and the Central Bank that were voiced at the time regarding the management of the Covid crisis. Now, when we look in retrospect, we see that our policy of managing Covid can be evaluated in retrospect as the best, because, I want to remind you again, when Armenia appeared in 11th place in the World Index of Economic Freedom, there were comments, the aim of which was to belittle that index. they said, well, there were many developed countries that after Covid, their indicators got so bad that Armenia got a chance. This means that compared to the same developed countries, the Covid crisis in the Republic of Armenia was managed so well economically that it enabled us to achieve a rapid growth in the Economic Freedom Index. Of course, we will still have opportunities to summarize the year from an economic point of view.

Regarding the banking system, I would like to develop our cooperation with the Central Bank in 2 directions. Moreover, I must record that the word cooperation is very correct, because there are things that are simply not noticed, and this should be recorded. For example, it is very important to record today that the Government does not really interfere in the policy of the Central Bank, that is, the Central Bank makes its decisions exactly in the manner and logic defined by the Constitution and laws of Armenia, which does not mean that there is no communication between the Central Bank and the Government, the opposite would simply be disastrous because we implement many projects together. Moreover, now we have delegated one more extra function, conditionally speaking, to the Central Bank, and I hope that the digitalization agenda will move forward with really visible steps in that regard. It is about implementation, because policy development is the domain of the Government. In this case, we consider the Central Bank and the bank’s capabilities as an operator to implement the policies decided by the Government.

In this regard, I would like to develop this cooperation in two directions as well. First, banks should participate more actively in development programs, including social development programs, because we need to review the effectiveness of purely social programs. The second direction is increasing the financial literacy of the public and people, citizens. To be honest, I often face such situations, and we should be able to convey a logic to our dear compatriots, to help everyone establish themselves in the following logic: Of course, it is clear that sometimes the borrowers can be in a force majeure situation, indeed, in such situations that we have to discuss separately. But in general, the most important component of financial and political, civic literacy and stability, development is the following: everyone must be ready to take responsibility for their actions. This is extremely important and has civilizational significance, and this is not just a banking issue. In general, I think this is an issue of very deep socio-psychological significance for the public, and we should be guided by this logic. Everyone will benefit from it: citizens, the economy, the banking system, and the beneficiaries and borrowers themselves.

I want to wish all of us success in the coming year, and I hope that we will make progress due to all these approaches and innovations. For example, maybe it’s not so good to talk about it publicly, but I think it’s worth mentioning at least once. In the Republic of Armenia, the institution of political or administrative lending, so to speak, has disappeared. Today, no one can say that someone from the Government, from any high-ranking circle, has told that this person should be given credit, this person should not be given credit. This is also an important factor and I want us to appreciate this fact. Because in most cases it is perceived that it should be right that way, and that’s okay. Yes, that’s how it should be and will continue to be, but that doesn’t mean we shouldn’t appreciate this fact. And a greater degree of mutual responsibility should come into play.

I want to say that the resilience of the banking and financial credit system is extremely important for us. Yes, we are overcoming the consequences of the war and Covid of 2020 thanks to the stability of the banking and financial system, inter alia, and one is interconnected with the other.

I want to remind you that in January 2020, Eurobonds were issued, which was the first very serious signal for everyone that the Republic of Armenia is a place where, yes, you can invest. Sometimes we don’t observe, we don’t discuss, we don’t record these facts, but they speak about a lot. This, of course, does not mean that we should have illusions. It is clear that we are facing very serious and existential challenges, but there is no possibility of showing one-sided resistance to these challenges, and it is a wrong approach. All systems, all institutions in the country must be accomplished, become more and more successful and efficient, and it is the culmination of increasing the efficiency of all institutions that should become a mechanism and tool for overcoming the most important challenges.

I thank you all for the work done. I congratulate you on New Year and Christmas and hope that when summarizing the results in 2023, we will be able to talk not only about the financial and banking system, but also about higher indicators and successes in general. Thank you”.

During the visit, Prime Minister Pashinyan was also presented with the newly constructed attic of the Central Bank’s administrative building with the ability of its multi-functional halls.

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