The head of Armenia’s largest business association stressed on Wednesday the importance of preventing “sharp” exchange rate fluctuations following a depreciation of the national currency, the dram.
“The key thing for the market is a stable and floating exchange rate, and if there is a depreciation it should be within a 1-2 percent range during one or three months. Sharp fluctuations are always dangerous for business,” said Arsen Ghazarian of the Armenian Union of Industrialists and Entrepreneurs.
The dram has lost roughly 5 percent of its value against the U.S. dollar since the beginning of this month amid slowing economic growth in Armenia. Most of that depreciation occurred in a matter of hours on Monday. The dram’s exchange rate was stable on Tuesday and Wednesday.
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 CBA said the exchange rate “adjustment” will spur growth by making Armenian exports more competitive.
“The Central Bank’s analyses are quire in-depth, and they look to the future,” Ghazarian told reporters. “We, the business community, have always wanted [exchange rates] to be stable and predictable.”
The business leader was ambivalent about a weaker dram, saying that it is good for exports but can push up the prices of imported goods on which Armenia is very dependent. Citing unnamed experts, he also suggested that the Armenian currency is overvalued even after its latest depreciation.
“Specialists believe that the dram should be worth less in order to have a normal exchange rate,” said Ghazarian. “But we have what we have. We have for years strengthened the dram.”