Banking System Operates Without Political Pressure, Says Nikol Pashinyan

Prime Minister Nikol Pashinyan visited the Central Bank and attended a reception organized on the occasion of the upcoming New Year and Christmas. The event was attended by President Vahagn Khachaturyan, Deputy Prime Ministers Mher Grigoryan and Tigran Khachatryan, Chief of Staff to the Prime Minister Arayik Harutyunyan, Central Bank Governor Martin Galstyan, members of the government, parliament deputies, and representatives of the Central Bank and the financial-banking system.

In his speech, Prime Minister Pashinyan stated: “I welcome all of you and am glad to see you. I must note that the Central Bank is clearly one of the most important institutions of our state, as is the banking system in general. Since 2018, the government’s policy has been as follows: we must create proper conditions for ensuring the institutional independence of the Central Bank. We have consistently adhered to this policy, which in no way has indicated a disconnection, because, in fact, representatives of the Central Bank participate in all discussions of our strategies and all conceptual discussions. At the same time, we have made an evident decision, which has been a topic of discussion in Armenia for a long time, that institutional separation of functions must be fully ensured.

I am confident that this is also the reason we have been able to ensure macroeconomic stability despite going through very significant shocks. The Armenian government naturally has its positions and approaches regarding all issues and communicates them. However, the government has never crossed institutional lines and relies on the institutional capabilities and responsibilities of the Central Bank. I believe that this decision has proven its validity.

Indeed, there have been complexities related to our financial market and the overall macroeconomic environment, but it is also this approach that has allowed us to make a precise division of labor, with each sector focusing on its work. As a result, macroeconomic stability has been ensured during the most crisis-ridden periods, and we have successfully provided high economic activity and growth for several years now. According to the Central Bank’s calculations, from 2018 to the present, Armenia has achieved over 28 percent economic growth.

I want to emphasize that the banking system operates in an environment free from political pressure. This is also something that I believe is good and must be maintained, but at the same time, it should be noted because these subtleties, which are not recognized or recorded, provide a background for the stability of macroeconomic and financial markets. When we combine this with the environment of high economic growth, we see that our banking system also has impressive indicators. Notably, as of November 2023, the total deposit portfolio of the Armenian banking system has recorded a record volume of 5 trillion 619 billion 277 million drams. It is very important that the growth is stable and continuous. This figure exceeds the indicator for October of this year by almost 84 billion drams or 1.51 percent, and compared to the same period in 2022, it has increased by 13.46 percent. Moreover, compared to 2018, the deposit portfolio has effectively doubled, with growth exceeding 95 percent.

The total loan portfolio of our banking system has also recorded a record volume, amounting to 5 trillion 365 billion 604 million drams as of November, which again exceeds the October figure by 2.2 percent, the previous year’s November figure by 21.3 percent, and the November 2018 figure by more than 57 percent. I believe it is important to note that the total deposit portfolio exceeds the total loan portfolio by 253 billion drams, which is a very important guarantee of the stability of the banking system.

One or two more data points I would like to mention: as of November 30 of this year, the number of customers in the banking system was 4 million 442 thousand 950 people, which is an increase of 19.3 percent compared to 2022, and an increase of 65.7 percent compared to 2018. As of September 30, the total number of accounts in the banking system was 8 million 995 thousand 422, which is 22 percent more than in 2022 and 78 percent more than in 2018.

These statistics are impressive and, along with the decisions regarding capital increase noted by the Central Bank Governor, the stability reserves of our banking system have been significantly increased, which is very important for enhancing economic growth potential. The fact that the deposit portfolio is much larger than the loan portfolio also inspires hope that the banking system still has certain potential to contribute to at least a 7 percent economic growth next year. Here, our business sector and the real sector must focus on the quality of projects to generate interest in the banking system.

I would like to congratulate us all on these indicators and also thank those who have worked to bring us to this realm of green indicators. Of course, this is not the peak of our capabilities; our primary task is to ensure stability, and the second task is to realize the potential available in the economy and banking system. The government is inclined to support this policy.

I also want to emphasize that in recent years we have been implementing certain social programs, hoping that the banking system's partners will support and actively participate. I would like to thank all the banks that have responded to the government’s social programs during this time and have provided practical and moral support; this is important collaboration.

I believe that on the other hand, we are seeing new manifestations in our economy, which should also be encouraged, whether or not they are related to the banking system. We see certain trends of activation in the securities market. I remember we were discussing how important this sector is to macroeconomics in 2018-2019, and I am glad to see some movement in this area as well. Of course, the main actors here are still the banks and the banking system, both in the role of issuers and buyers, but I believe it should stay that way. To revive the market and kickstart it, we have no other expectations; what is important for us is that this mechanism begins to operate. When the operation of this mechanism becomes sufficiently reliable, I believe we will see new players emerging in that field.

Dear attendees, respected representatives of the banking system, I thank you all for your work throughout 2023, and of course, I am convinced that we are all determined to ensure high economic growth in Armenia in 2024 as we did in previous years. For this, of course, effective work from all branches of government is necessary, but the Central Bank and the banking system clearly play a very significant role in addressing this political issue. Thank you for your readiness and determination so that next year, when we gather here, not only the banking system but also, overall, Armenia’s macroeconomic indicators will be in the green zone and we will all feel satisfied with our work, ensured economic growth and development.

I congratulate you and your families on the New Year and Christmas!