By Atom Markarian
Armenia’s Central Bank ruled out on Tuesday any monetary intervention in a renewed strengthening of the national currency, the dram, that has chipped a further 6 percent of the U.S. dollar’s market value in just a week.
The dollar, which has lost ground to other major Western currencies throughout this year, was trading at an average of 470 drams in Yerevan’s currency exchange offices, down from 500 drams registered last week. The dramatic change completed a year-long trend that has seen it gain as much 17 percent in value against the greenback since December 2003.
The dram’s latest upsurge was a further blow to the purchasing power of tens of thousands of Armenian families dependent on regular dollar remittances from their relatives working abroad. Analyst expect its further strengthening in the run-up to the New Year shopping binge when many people tap their savings, still mostly kept in dollars, to prepare for the holiday.
But the Central Bank’s chairman, Tigran Sarkisian, made it clear that the Armenian authorities will not seek to shore up the dollar because they believe that a strong dram is essential for low inflation. He also argued that the majority of Armenians earn income in drams.
“We must come to terms with the fact that the dram’s appreciation against the dollar has seriously restrained the prices of imported goods,” Sarkisian said. “Only market factors will determine exchange rates in the Republic of Armenia.”
According to official statistics, Armenia’s consumer price index has barely changed since December 2003, meaning a virtually zero inflation. Government officials say the strong dram has neutralized the negative impact of rising oil prices in the international markets on Armenia where fuel prices have remained stable this year.
The exchange rate fluctuation is part of the dollar’s worldwide depreciation, notably against the euro, the European Union’s single currency. But even the euro has weakened 4 percent against the dram in the past year.
The Armenian authorities have been dogged by allegations that they themselves are adding to the national currency’s value in order to benefit the government-connected importers of basic commodities. The Central Bank chief has repeatedly denied such claims, attributing the dram’s unprecedented rise to this year’s surge in external cash remittances.