Narek Karapetyan, head of the Strong Armenia faction, raised concerns about citizens’ loan obligations and high borrowing costs during a question-and-answer session in the National Assembly with Sevak Mikayelyan, nominated by the Civil Contract faction for a position on the Central Bank Board.
“How can you justify a policy under which we are now in a situation where refinancing rate policy has no effect on reducing interest rates on loans taken out by citizens? People’s loan interest rates are not falling, or even approaching the refinancing rate set by the Central Bank,” Narek Karapetyan asked, Panorama.am reports.
He also asked what assistance or regulatory mechanisms the Central Bank could offer families whose debt burden far exceeds their ability to repay, and what opportunities could be provided to help them resolve their overdue loan obligations.
Sevak Mikayelyan acknowledged that consumer lending had experienced accelerated growth. According to the figures he presented, annual growth stands at no less than 20%, while the total volume of consumer loans has already exceeded two trillion Armenian drams.
The candidate for the Central Bank Board explained that the bank’s main instrument in such situations is the countercyclical capital buffer. This requirement has already been raised twice during the current year and is scheduled to reach 2.25% next July.
According to Mikayelyan, the Central Bank adopted this measure after assessing the increase in the ratio of loans to gross domestic product (GDP). He attributed the substantial expansion in lending to growing demand for loans among the population.
Addressing high lending rates, the candidate noted that when demand for a particular product or service increases rapidly, it is difficult to rule out a corresponding rise in its price.
Mikayelyan said that, if elected to the Central Bank Board, he would take an active approach to addressing problems in the lending sector. In particular, he emphasized the potential of responsible lending mechanisms and the Central Bank’s secondary regulations to limit increases in interest rates.
Narek Karapetyan asked: “What will you do to prevent a new crisis in society caused by the burden of loans? We face this problem because production capacity is not increasing, while lending is growing sharply.”
In response, Sevak Mikayelyan said that, if elected, he was prepared to actively address the issue. As one possible regulatory measure, he pointed to introducing limits on the ratio between citizens’ incomes and their debt obligations.
At the same time, the candidate stressed that imposing such restrictions could affect free-market relations, a factor that would need to be considered when making relevant decisions.
Nevertheless, Mikayelyan reiterated that the continued and substantial growth in household debt had created a need for regulatory intervention.
