The various aspects of Armenia's financial system were reformed or replaced piecemeal in the early 1990s, with the national cash flow severely restricted by the strangulation of foreign trade and diversions to support military operations and emergency humanitarian needs (see table 7, Appendix).

Banking

Banking reforms in Armenia moved somewhat more slowly than in other former Soviet republics. In late 1991, the specialized state banks of the Soviet system were converted into joint-stock commercial banks, and some new commercial banks were formed. But the State Bank of Armenia (Gosbank Armenia) and the Bank for Foreign Economic Affairs remained official branches of central state banks in Moscow. The consequence was diminished local control over monetary policy.

A new Central Bank of Armenia was not fully established until early 1994, and even then the bank was not entirely free of state control. The global financial community considers the bank's independence vital to normalization of Armenia's international financial dealings, along with stabilization of the dram (for the value of the dram--see Glossary), the national currency established in 1993, and regularization of the dispersal of state pension allowances. In 1993 official exchange rates for the dram were as much as 100 percent more than black-market rates, which economists consider the more accurate value. Because of a shortage of hard currency in 1993, banks tried to restrict sales of hard currency that would further diminish the exchange value of the dram.

Data as of March 1994