A representative of Armenia’s Central Bank (CB) has ruled out that the introduction of a 100K Dram banknote on Monday increases inflation risks or forestalls an imminent devaluation of the national currency in Armenia.
CB Board member Vakhtang Abrahamian told RFE/RL that the regulator’s specialists had studied the issue and concluded that the introduction of this large banknote, equivalent to roughly $265, does not threaten any major devaluation of the national currency.
Until now, a 50K Dram bill was Armenia’s banknote with the highest face value.
“This banknote, according to our estimations, will take only 3 percent in cash circulation on the market, which cannot have any significant impact on the economy in terms of the value of the national currency or any inflation risks,” said Abrahamian.
Abrahamian said CB experts had studied the experience of a number of countries, such as Lithuania, where the highest nominal value of a banknote is equivalent to 1,000 Euros (approx. $1,433).
“This experience shows that on the contrary it facilitates large transactions and avoids situations where large transactions are carried out with the use of foreign currencies,” he added.
Meanwhile, economist Vahagn Khachatrian, who represents the main opposition Armenian National Congress (HAK), regarded the move as a sign of a possible depreciation of the Armenian currency.
“It is an accepted practice in all countries that banknotes of a higher nominal value are printed when devaluation takes place,” Khachatrian said in an interview with RFE/RL.
Meanwhile, former CB chairman Bagrat Asatrian also ruled out that the introduction of 100K Dram banknotes would have any impact on the value of the Armenian currency. He said it would only alter the structure of the money supply rather than expand it.
“I think there is also something positive here, and eventually large banknotes are also a means to combat dollarization,” said Asatrian.