By Ruzanna StepanianTigran Sarkisian, the chairman of Armenia’s Central Bank, continued on Wednesday to defend the strengthening of the national currency, the dram, saying that it will help the authorities bring inflation down to 3 percent this year.
“We can conclude that the appreciation of the national currency has substantially restrained the growth in prices in Armenia,” he said during hearings at the Armenian parliament’s committee on finance and economy.
The assessment reflects the opinion of the International Monetary Fund expressed through its Yerevan office earlier this month.
Macroeconomic figures released by the National Statistics Service this month show the overall consumer price index falling by 0.5 percent between last December and August. Officials reported a 5 percent deflation during the summer months. It was attributed to a traditional seasonal drop in the prices of fruit and vegetables
Sarkisian put the emphasis on the stronger dram’s impact on key imported goods such as fuel. He stressed that it has offset this year’s global surge in oil price, keeping the retail price of petrol in the Armenian market virtually unchanged. “The fuel prices in Armenia have not risen for the simple reason that the national currency has been appreciating,” he said.
The authorities failed to meet the same inflation target last year when consumer prices rose by an average of 8.6 percent. The blamed that on a sharp rise in the price of wheat in the international markets.
The Central Bank chief reiterated his view that this year’s nearly 10 percent increase in the dram’s value against the U.S. dollar results from continuing economic growth and increased inflows of hard currency from tourists and Armenians working abroad. Cash remittances from the latter jumped up 42 percent to $175 million in the first half of this year, according to the Central Bank.
“World experience shows that if you have a currency influx worth more than 2 percent of your GDP there will be a [financial] shock,” Sarkisian argued. “Such a shock took place in Armenia this year.”
He again dismissed as a “nonsense” some economists’ allegations about exchange rate manipulation. According to one theory, the authorities boosted the dram’s value to stave off further highly unpopular price increases.