By Shakeh Avoyan
The Armenian Central Bank (HKB) is cutting the money supply in an effort to curb inflationary pressures caused by an unprecedented surge in prices of basic agricultural products, officials said on Saturday.
An HKB spokeswoman said the bank began selling U.S. dollars last month to reduce the amount of cash in circulation and prevent an overall increase in the consumer price index.
Fruits and vegetables, mainly grown in Armenia, now cost at least twice as more as they did last year despite the continuing low level of inflation. Government officials and farmers blame the price hikes on last spring's unusually long period of rains with significant damage to the Armenian agricultural sector. The unfavorable weather conditions have resulted in poor farm harvests, pushing up prices dramatically in wholesale and retail markets across the country.
Traders also claim that this year has seen a sharp rise in exports of Armenian fruits and vegetables which have boosted local demand. However, merchants say that because of the unprecedented high prices, local demand has started to ebb, with people simply buying less produce.
Known for their high quality and relatively low price, the domestic agricultural products were until recently among the most affordable items for the average Armenian consumer.
"These prices are awful. This is the worst year in my memory," said a middle-aged woman in one of Yerevan's produce markets.
According to official figures, consumer price inflation in Armenia stood about 2 percent in the first half of the year. This is slightly higher than what was projected by the government and HKB. Central Bank officials said they still hope to meet the annual target of 3 percent.