Thursday, 17 May 2012
Macroeconomic Stability Enhanced
A Cabinet sitting was held today, chaired by Prime Minister Tigran Sargsyan.
Opening the meeting, the Prime Minister advised that the monitoring of 15 inspectorates kicked off yesterday, with the findings to be summed up in two weeks. “Improved public service quality will be in the spotlight. We have had serious progress in many areas. Notwithstanding, the monitoring of public agencies will be continued considering that some services are still encumbered by red tape: people often have to pay a bribe to get a reference. The monitoring is off, and we will finalize the per-sector findings within two weeks,” the Prime Minister said.
Proceeding to the agenda, the Cabinet first examined the Central Bank’s statement on monetary policy program performance for 2011. As a result, 2011 was described as conducive to strengthened macroeconomic stability.
Firstly, thanks to consistent and well-balanced monetary and fiscal policies, it was possible to check the inflationary trends which started in mid-2011. Secondly, the growth rate started going upwards mainly due to progressive growth in industry and agriculture.
In this connection, the head of government noted, “The international financial institutions hailed our country’s macro-economic performance, as well as its fiscal and monetary policy coordination efforts. This is why the succeeded in the talks with the International Monetary Fund and the target program was approved in May without a problem.
We can state that Armenia’s macroeconomic stability strengthened in 2011, which is quite a good achievement. We will abide by this policy ahead. Moody's rating agency has upgraded Armenia’s standing providing favorable conditions for continued economic growth. We used to be criticized for inefficient monetary and fiscal policies, but we can see now that the international organizations appreciate the government’s efforts. It is clear that the world is guided by their assessment.”
The Executive next approved a draft government opinion on Central Bank’s monetary policy program for 2012. Noting that the macroeconomic priorities set out in the Central Bank’s program meet the government’s strategy as a whole, the meeting concluded that the CBA should be more flexible in the face of risks associated with reduced economic activity.
Commenting on the critical statements addressed to the government, the Prime Minister pointed out: “The Central Bank strives to check inflation, while the government tries to ensure economic growth and, for this very reason, we often come at odds with the Central Bank. But we both should abide by the clear-cut guidelines set for the coordination monetary and fiscal policies. Our critics say the right hand does not know what the left hand is doing. This criticism is unfounded. People just do not understand what the coordination of monetary and fiscal policies means. We are far from merging the functions vested in these two institutions. As the Central Bank is an independent entity by virtue of the Constitution, the debate must go on to ensure macro-economic stability. The parties to the dialog should continue arguing over the expediency of a specific policy at one or another stage of development. As you may remember, we opted for expansion and therefore gave preference to economic growth during the crisis years. The Central Bank reduced the refinancing rate by 2.25 percent to help us overcome the crisis. Next came the turn of inflation. As we entered the phase of high inflationary pressure, we gave preference to the policy of checking inflation. As a result, we returned to the environment specified in our medium-term expenditure program. This is why our opponents should refrain from speculating over the ways the Government and the Central Bank must cooperate, especially as their assertions are ill-founded and inconsistent with domestic laws and the international practice.”
