Armenia’s national currency, the dram, has lost over 4.5 percent of its value against the U.S. dollar over the past week in what analysts see as a further sign of spillover effects of the worsening economic situation in Russia.
The depreciation accelerated on Monday, with the dram’s average exchange rate tumbling from 419 to 435 per dollar within hours. One dollar was worth 415 drams a week ago and 411 drams early this month.
The Central Bank of Armenia (CBA) sought to downplay the dram’s weakening, attributing it to “recent developments in the regional and international financial markets.” “The Central Bank reserves are absolutely sufficient for preventing all kinds of artificial exchange rate fluctuations and ensuring financial stability,” it said in a statement.
Speaking to RFE/RL’s Armenian service late last week, a senior CBA official, Vahagn Grigorian, denied media reports that the bank is making substantial dollar injections in the local currency market to prevent a sharper dram depreciation. He insisted that the dram’s exchange rate, which has been generally stable since in the last few years, remains “floating” and market-based.
Bagrat Asatrian, a former CBA governor critical of the current Armenian authorities, said the dram’s weakening is the result of slowing economic growth in Armenia and falling dollar remittances from Armenians working in Russia. “The Armenian economy is only stumbling forward this year,” he said.
Since the beginning of this year the Russian ruble has lost more than a third of its value against the dollar not least because of Western economic sanctions imposed on Moscow. This is increasingly reducing the real monetary value of the vital remittances from Armenian migrant workers.
A looming recession in Russia is seen as the main reason why economic growth Armenia is on course to fall short of a 4 percent target set by the authorities in Yerevan earlier this year.
The CBA statement claimed that the latest “adjustment of the dram’s exchange rate” will spur growth by making Armenian exports more competitive. It also argued that a stronger dollar will increase the dram equivalents of the remittances supporting a large part of the country’s population.
Vartan Bostanjian, another economist, claimed the opposite, saying that the dram depreciation will push up consumer prices given Armenia’s heavy dependence on imports. “Ordinary citizens will suffer losses,” he said.