Susanna Petrosyan, Yerevan. Exclusively to Vestnik Kavkaza
For the last two weeks the Armenian dram has fallen drastically against the dollar. The dollar previously cost 410-415 drams. At the moment it costs 460 drams in some banks and exchange offices. Sharp fluctuations of dram – the dollar’s growth to 450 drams, its falling to 430 drams, and then a new growth to 460 drams – are a serious problem as well.
There is panic in Armenia, as the sharp fall in the value of the dram influences prices ahead of New Year's Eve.
According to the Central Bank, the sharp fluctuations if the dram were caused by developments on world markets, including fluctuations on exchange markets; however, as the dram fluctuations have a short-term character and the level of monetary reserves is sufficient, there is no serious threat to monetary and financial stability.
The Prime Minister of Armenia, Ovik Abramyan, explained that the inflation is due to the developments happening in Russia and “mistrust of people” to some extent. The Premier doesn’t connect the sharp fluctuations of the dram with internal economic problems.
The Armenian economy does depend on the Russian one, but the ruble falling really influences the volumes of transfers which are sent home by Armenian migrants. According to the Union of Armenian Banks, the volume of transfers to private individuals from Russia to Armenia through the banking system of the country fell by 7-14% in the last few months. It should be noted that 85% of transfers come from Russia.
However, if the sharp fall of the dram is connected with external factors, it doesn’t mean that there are no serious problems in Armenian monetary policy.
The authorities prefer to hush up that the situation has been caused by a sharp fall in economic growth, along with external factors. Due to galloping import growth, the negative balance has grown in the foreign trade turnover. In the last three months, imports from Russia have grown 10%, while Armenian exports reduced by 6.2%.
Moreover, the monopoly system of the Armenian economy and the popular policy (especially by the former prime minister Tigran Sarkisyan) of artificial overvaluation of the dram against the dollar in favor of importers and at the expense of Armenian exports. “The authorities have been providing a policy of artificial overvaluation of the dram for many years. We have pointed out many times that the policy is not only killing exporters, but also negatively influencing the competitive environment in business and leading to a dangerous sputter of our reserves,” thinks Levon Zurabyan, the head of the opposition parliamentary faction of the Armenian National Congress.
According to him, the country is losing disastrous amounts of monetary reserves. From January to October 2014 the reserves have fallen from $2.113 billion to $1.663 billion.
Some economists think launching a managed float of the dram is necessary. A policy of managed smooth devaluation will enable monetary reserves to be collected and exports developed. According to opposition politicians, the best way to restrain inflation is de-monopolization of the Armenian economy.
Koryun Manuryan, a journalist of 7or.am, thinks that the only way out is a decision on a shift to a real dram exchange rate by the Central Bank: “It will be a painful step in the short-term period, but at least it will eliminate irrational expectations and bring clarity to the business space.”
Samvel Chzmachyan, a representative of the Union of Armenian Banks, believes that by December 20-25 opposite processes will start, and the Central Bank will manage to decrease the dollar rate against the dram to the level of 430 drams.
Meanwhile, today in some exchange offices dollars are not being sold; the maximum a person can buy is $100. According to experts, this means that the official dram exchange rate doesn’t reflect the real balance between demand and supply, even though the balance determines the current dollar exchange rate.
