By Atom MarkarianArmenia marked on Monday the tenth anniversary of the introduction of the dram, its national currency once widely mistrusted by the population but now seen as one of the most stable in the former Soviet Union.
An official ceremony, organized by the Armenian Central Bank and attended by President Robert Kocharian, was held at the National Art Gallery in Yerevan. Officials said the dram’s strength and domestic convertibility proves the wisdom of tight monetary policies that are credited with the country’s macroeconomic stability that has continued since the mid-1990s.
“We can now say that our national currency has been a success,” Central Bank chairman Tigran Sarkisian told RFE/RL. “This is evidenced by the macroeconomic situation in Armenia.”
The dram was introduced to replace the rapidly depreciating ruble of the already defunct Soviet Union in November 1993, at the height of Armenia’s post-Soviet economic collapse and the war in Nagorno-Karabakh. Hyperinflation and a lack of hard currency in the Central Bank coffers meant that the Armenian currency’s value plummeted from 17 to 400 drams per one U.S. dollar within months.
Its exchange rate stabilized after the administration of then President Levon Ter-Petrosian opted for tight fiscal and monetary policies and received first loan injections from the International Monetary Fund and other Western lenders. The May 1994 ceasefire agreement in Karabakh also played a role. One dollar is now worth 570 drams.
The ensued economic growth has enabled the Central Bank to increase its hard currency reserves to nearly $500 million from just $500,000 Armenia had back in 1993. The IMF will further boost those reserves with yet another $14 million loan which it is due to release this week.
Nevertheless, many business transactions in Armenia continue to be carried out in dollars and most Armenians still convert their savings into the U.S. currency, in a clear indication of their persisting distrust of the dram’s long-term value.
Sarkisian admitted this reality, blaming it the continuing huge scale of the shadow economy, widespread cash transactions and substantial dollar remittances sent home by Armenians working abroad.