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Armenian Dram Again Rising Against Dollar


By Atom Markarian
The U.S. dollar has resumed its year-long weakening against Armenia’s national currency, the dram, despite rallying in international financial markets this month.

The dram has gained more than 5 percent in value against the greenback over the past 10 days, approaching a three-year high registered in the middle of December. It was trading at an average of 473 per $1 on Monday, making it worth 20 percent more than a year ago.

The dollar was worth approximately 470 drams when President Robert Kocharian held an emergency meeting with members of the Armenian Central Bank’s board on April 13, admitting that “speculative activities” have played a role in the unprecedented exchange rate fluctuations. The U.S. currency surged to about 500 drams within days and remained at that level until January 18.

The ensued trend is all the more surprising given an almost 5 percent increase in the dollar’s value against the euro since the beginning of this month. Economists critical of the Armenian government have renewed their allegations that the Central Bank is artificially bolstering the dram in an effort to benefit government-connected importers of some key commodities.

“This is a game played by importers because it is importers that mainly benefit from the strengthening of the dram,” one of them, Eduard Aghajanov, told RFE/RL.

Aghajanov also alleged a continuing influx of “dollars of dubious origin” which he said are laundered in Armenia by foreigners. “Some of that money stays here, increasing the amount of dollars in circulation,” he said.

Some ordinary Armenians agree with this theory. “There is aid coming from abroad. They are making sure that they can buy that money on the cheap,” said one man as he converted cash at a currency exchange office in Yerevan.

The Central Bank, meanwhile, stands by its arguments that the stronger dram is the result of increased cash remittances from Armenians working abroad. It estimates that they sent at least $760 million to Armenia last month through banks and wire transfer networks.

The bank’s chairman, Tigran Sarkisian, also insists that the strong dram is good for the Armenian economy because it keeps inflation at a low level. “The dram’s strengthening has had a major restraining impact on the prices of imported goods,” he said in late December.

But this assertion is strongly disputed by analysts from the Armenian-European Policy and Legal Advice Center (AEPLAC), a research agency funded by the European Union. In a study published this month they accuse the Central Bank of keeping the national currency’s circulation artificially low. They say the monetary base is now worth only 17 percent of Armenia’s Gross Domestic Product, much less than in many other developing nations where that proportion is close to 40 percent.

The AEPLAC also published the results of an opinion poll that suggests widespread dissatisfaction with the stronger dram. According to the center, 47 percent of respondents said they have lost from the dollar’s depreciation and only 27.6 percent claimed to have been better off as a result.
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