Prime Minister Hovik Abrahamian appealed to the Central Bank of Armenia (CBA) on Friday to crack down on “speculative” currency trading in the local market on Friday as the Armenian dram depreciated further against the U.S. dollar.
The Armenian currency was down by around 1 percent, trading at 448 drams per dollar in the evening, according to the CBA. Armenian commercial banks set different exchange rates, however, averaging 453 drams per dollar.
Abrahamian exposed the Armenian government’s serious concern over the latest rate fluctuations with an extraordinary statement sent to News.am later in the day. “Given the existing tensions in the financial market, it is extremely important that all market players follow the set norms and rules,” he said. “I do not exclude that in this situation there will be attempts to fish in troubled waters.”
“I am therefore appealing to the Central Bank to closely monitor, in this regard, the actions of all currency market players in order to prevent speculative cases. In case of detecting such cases, it will be necessary to strictly enforce all sanctions envisaged by law,” added the statement.
The CBA’s vice-governor, Nerses Yeritsian, assured Abrahamian’s cabinet on Thursday that the Central Bank has enough hard currency to prevent “artificial fluctuations” of the dram’s value. Earlier this week, the bank urged Armenians to avoid panic buying of dollars.
Samvel Chzmachian, the chairman of the Union of Armenian Banks, suggested on Friday that the dram is being dragged down not only by the collapse of the Russian ruble but also “speculative actions.” “For example, there were cases where banks set [the exchange rate] at 439 drams [per dollar,]” he told RFE/RL’s Armenian service. “Through various people, currency exchange retailers then bought [those dollars] and sold them for 457-460 drams. They are getting even taxi service workers involved this. We have such evidence.”
Chzmachian said the Armenian currency’s real market value should now be worth 435-445 drams per dollar. He predicted that the dram may well rally against the dollar on the eve of the New Year and Christmas holidays.
Meanwhile, a senior official from the International Monetary Fund confirmed that the Armenian authorities have sufficient hard currency reserves to prevent sharp exchange rate fluctuations and keep inflation with their target band of 4 percent (±1.5 percentage points ) this year. Teresa Daban Sanchez, the IMF’s resident representative in Yerevan, singled out the unfolding economic crisis in Russia as the main factor behind the dram’s weakening.
Daban Sanchez said the authorities should neutralize the fallout from the Russian recession with measures that would stimulate faster economic growth. In that context, she renewed the IMF’s long-standing calls for a radical improvement of the domestic business environment.
Daban Sanchez said that the decreased international oil prices should have already considerably reduced the prices of diesel fuel and other essential commodities in Armenia. The fact that this has not happened so far is a further indication of a lack of competition in some sectors of the Armenian economy, she told reporters.
The IMF forecast earlier this year that economic growth in the country will fall short of a more than 4 percent rate targeted by the authorities and likely come in at 2.6 percent in 2014. In Daban Sanchez’s words, growth should accelerate to 3.3 percent next year.