The CBA’s governing board set the refinancing rate at 5.5 percent, up by 0.25 percentage points.
The board already raised it by 1 percentage point on December 15 following a nearly 6 percent depreciation of the national currency, the dram. The dram’s exchange rate has remained largely stable since then.
The CBA said on January 13 that it will again resort to currency interventions to ensure “the normal functioning of Armenia’s financial markets.”
In a statement issued later in the day, the bank attributed the latest rate increase to stronger inflationary pressures on the Armenian economy. It said that the increased cost of imported foodstuffs “considerably” pushed up consumer price inflation in the country in December.
CBA data shows that Armenia’s foreign exchange reserves fell from $2.6 billion in August 2020 to $2.2 billion in November before growing by over $360 million in December.
The Central Bank cut its benchmark rate for four times between March and September last year as the Armenian economy plunged into recession due to the coronavirus pandemic.
Armenia’s economic outlook worsened further following the ensuing outbreak of the war in Nagorno-Karabakh stopped by a Russian-brokered ceasefire on November 10. The country’s GDP shrunk by an estimated 8.5 percent in 2020.
In its 2021 state budget approved by the parliament in December, the Armenian government forecast a GDP growth rate of 3.2 percent for this year. The International Monetary Fund expects the Armenian economy to expand by only 1 percent in 2021.