Armenia had similar difficulties on the breakup of the Soviet Union to many other countries, but moved more quickly towards a market economy. Despite considerable external difficulties and a weak financial system, it was able to embark on inflation targeting in the mid-2000s, initially with poor results but from 2011 with reasonable success.

Years Targets and attainment Classification
1992-94 independence (out of USSR) declared 1990 but recognised only late 1991; exogenous shocks from 1988 earthquake to breakup of FSU trade and payments arrangements; long-standing tensions with Azerbaijan over Nagorno-Karabakh enclave lead to economic blockade in late 1991 that, along with disruptions to trade via Georgia, cripples economy and exacerbates high inflation originating from Russia; moves to market economy from 1991, but continuing use of Russian ruble; local branch of USSR central bank, renamed National Bank of Armenia end-1991, unable to restrain rapid credit expansion 1992, transformed into standard central bank early 1993 with more powers but little expertise and no autonomy; high growth of credit to public sector (with loans to SOEs supplied by ministry of finance instead of banks); local branches of FSU banks converted into commercial banks cater mainly for firms, not households, as do most new banks; domestic and international payments system problems; introduction of national currency considered from early 1992, realised in haste November 1993 after Russian currency reform mid-1993 (and made sole legal tender March 1994), with exchange rate set vs USD but soon allowed to float, via regular forex auctions in non-cash market, also cash market; early 1994 central bank independence increased with agreed targets for central bank credit to finance ministry; ceasefire July 1994;  monetary policy tightened from mid-1994; comprehensive programme of stabilisation and structural reform late 1994 unstructured discretion UD
1995-2010 1995-6 directed credits phased out, reserve requirements revised, treasury bill issues started, payments system reformed and interest rates normalised, but budget deficits still affect monetary growth, while banking system is weak and small; policy operated via flexible focus on announced target corridor for reserve money; 1996-7 primary treasury bill market improved but minimal secondary market; rise of interbank forex market as main locus for forex trading; 1998 Russian crisis; assassinations and political turmoil late 1999 to mid-2000; 2000-01 failure of ten banks leads to measures to stabilise banking system and improve supervision; dollarisation very high; central bank has inflation objective from 2004; wide inflation targeting announced January 2006, with repo rate in corridor as operational target, forecasting and communication to be improved; inflation targets overshot four years out of five; some recurring unsterilised forex intervention; Georgian-Russian hostilities 2008; GFC has large adverse effects including collapse of remittances, crisis of confidence 2009; dedollarisation 2007-8 reversed 2009-10 loosely structured discretion LSD
2011-17 wide inflation targets attained 2011-14, well undershot 2015 and 2016, but attained by end-2017, while inflation expectations of financial system remain broadly anchored and those of households go below the band but remain positive and return within the band late 2017; interbank market and monetary transmission mechanism remain weak; periodic forex intervention, authorities resist IMF pressure for more flexible exchange rate; 2015 accession to Eurasian Economic Union loose inflation targeting LIT

Selected IMF references: RED 1993 pp10-15, 20-2, 69-78, 91; SR 1993 pp1-3, 7-8, 12-13; RED 1994 pp1-2, 19-20, 22-5, 31-2, 102; SR 1994 pp7-9, 12; REDSI 1996 pp5, 25-8, 35; RED 1998 pp4, 23-5, 33; REDSI 1999 pp13-18; REDSI 2000 pp12-15, 20-1; REDSI 2001 pp12-16, 25-6; SR 2002 pp9-11; SI 2004 pp12-16, 47-51, 57; SR 2004 pp11; SR 2006 pp9-12, 18; SI 2008 pp20-1, 23-6, 34-7; SR 2008 p15-16; SR 2010 pp10-11; SI 2014 pp3-5; SR 2017 pp16-17; SR 2019 pp13-14; SR 2021 p6.

Other references: Central Bank of Armenia Inflation  Reports, 2017 Q1 p25, 2017 Q4 p16, 2018 Q1 p13.

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