By Shake Avoyan
A manager of Armenia’s leading diamond exporting company fears a further appreciation of the national currency may leave producers oriented for foreign markets counting their losses.
Head of the British-registered Diamond Company of Armenia and President of the International Association of Armenian Jewelers Gagik Abrahamian told the media at the Hayeli (Mirror) club on Tuesday that if the situation continues it may cause many exporting businesses to wind up their operations altogether.
Abrahamian, who is brother of influential President of the Union of Armenians of Russia Ara Abrahamian, said exporting companies in Armenia do not yet work at a loss, but he said their profits have considerably reduced.
“I suggest temporarily fixing the dram’s exchange rate to the dollar or the euro to curb its further appreciation. It should be fixed for a certain period of time allowing for a certain percentage of fluctuation of course,” Abrahamian said, describing the exchange rate of some 400 drams per U.S. dollar as quite acceptable.
On the whole agreeing with Abrahamian, the owner of the Mika Limited Company, wealthy businessman Mikael Baghdasarov thinks, however, that the appreciation of the Armenian currency will have a long-term benefit for the economy, although he said as a cement producer he has suffered losses. “The timing for the strengthening of the dram has been chosen correctly, because all world prices are high, they have never been so higher before and are likely to start to fall in the near future. If international prices go down and the dram in Armenia gains in value, the losses will be greater, as now prices abroad compensate the losses incurred because of the exchange rate,” he explained.
Baghdasarov, a fuel tycoon believed to have super profits from the favorable situation with the dram/dollar exchange rate, says nothing should be changed in the Central Bank policy. “Only the dollar fall should be made slower,” he said.
The Armenian dram has gained more than 40 percent in value against the U.S. dollar since December 2003 and its appreciation is hurting domestic manufacturers and many people dependent on cash remittances from their relatives working abroad.
The authorities strongly deny any exchange rate manipulation. The Central Bank ascribes the upsurge primarily to recent years’ increase in hard currency wired home by hundreds of thousands of Armenians living and working abroad. Another explanation is the recently observed construction boom in the country that attracts millions of dollars from abroad invested in property.
Last month Suren Bekirski, director of the export-oriented textile company Tosp, told RFE/RL that as an exporter their company loses twice as much as it gains marketing its products locally.
“If things go on like this, we will last for only a few more months,” he said.