By Gevorg Stamboltsian
The chairman of Armenia’s Central Bank (CBA), Tigran Sarkisian, on Tuesday brushed aside government suggestions that speculative trading may have been behind the unprecedented six-month strengthening of the national currency, the dram.
“The Central Bank is being demanded not to allow speculative trading. This is nonsensical and absurd,” Sarkisian said bluntly at a news conference which he called to disprove persisting allegations about the CBA’s complicity in what some economists see as an alarming development for the Armenian economy.
The tough rebuttal seemed to be primarily addressed to Finance and Economy Minister Vartan Khachatrian who did not rule out on Friday the possibility of shady currency speculation pushing up the dram’s value dramatically. Khachatrian spoke the day after the dram’s exchange rate against one U.S. dollar soared from 520 to 490 within hours. Following an apparent CBA intervention it fell back to 512 late on Thursday and has since stabilized at 523 per $1.
The abrupt rate fluctuations prompted President Robert Kocharian to call an emergency meeting of senior government and Central Bank officials. Kocharian ordered an inquiry into the phenomenon, effectively giving more weight to the claims about currency manipulation.
Sarkisian challenged critics to come up with concrete evidence of CBA failings, questioning the competence of those alleging speculative trading. “Have the rules of [currency] sales and purchases been violated? Have there been instances of market participants flouting the law?” he asked.
“We are preparing a report for the government and the president that will carry a detailed analysis of commercial banks’ behavior during the last two weeks and whether there were legal violations,” he added.
The dram, introduced just over a decade ago shortly after Armenia became independent, has appreciated in value against the dollar and another major world currency, the euro, by approximately 6.5 percent since last December. The CBA maintains that increased inflows of cash from Armenians working abroad is the main reason for the stronger dram.
Sarkisian reiterated this view on Tuesday, saying that the amount of cash remittances carried out through Armenian banks alone rose by 46 percent to some $300 million during the first half of this year. He said a lot of hard currency has also been channeled into Armenia individually and through international wire transfer networks.
Some economists critical of the Armenian authorities say the dram’s strengthening benefits only large-scale importers and those financial speculators who can now purchase U.S. dollars at a relatively low price. They also argue that many Armenians continue to keep their savings in dollars and are dependent on hard currency remittances.
But according to Sarkisian, many more people rely on the dram. “Hundreds of thousands of people would suffer if we did not allow the dollar to lose ground,” he said. “Our main responsibility is to protect the interests of those people who have dram incomes.”
“You have to come to terms with the fact that the official legal tender in our country is the dram and should start to plan your life, calculate your revenues and expenditures in drams,” he added.
(Photolur photo: Tigran Sarkisian.)