By Shakeh Avoyan
The Central Bank of Armenia (CBA) has increased its benchmark lending rate for the fifth time this year, citing continuing inflationary pressures on the domestic economy.
Meeting earlier this month, the CBA board decided to raise the re-financing rate by 25 basis points to 7.25 percent, up from the May 2007 level of 4.5 percent.
The move came despite slight deflation registered by Armenia’s National Statistical Service (NSS) in June. It was mainly attributable to a seasonal drop in prices of domestically grown agricultural products.
In a written explanation of the rate rise released this week, the CBA board argued that the average annul rate of consumer price inflation stood at 9.6 percent in June, or well above the bank’s and the Armenian government’s target rate of 6 percent.
Official statistics show that the first-half consumer price index has been primarily pushed up by the increased international prices of foodstuffs such as wheat, cooking oil and butter. Armenia’s is heavily dependent on imports of those products effectively monopolized by a handful of government-connected businessmen.
Prime Minister Tigran Sarkisian said in late May that the de facto monopolies are also responsible for the “very high” inflation rate in addition to global market trends. He said the international prices of wheat and rice have fallen significantly over the past four weeks and instructed government bodies to make sure that there are corresponding price adjustments in Armenia as well.
A statement by the CBA board said that there have been no such adjustments yet, with imported foodstuffs remaining as expensive as they were last spring. “At the same international fuel prices remain high, maintaining additional inflationary risks,” it said.