By Ruzanna StepanianArmenia’s national currency, the dram, surged to a new high against the U.S. dollar on Tuesday, continuing its dramatic appreciation which is hitting hard local exporters and ordinary people dependent on external cash remittances.
The dollar was trading at an average of 400 drams in currency shops across Yerevan throughout the day, down from 415 registered a week ago. The dram is now worth 40 percent more, in dollar terms, than it was at the start of its prolonged strengthening in December 2003. It has also gained more than 30 percent in value against the European Union euro since then.
Bearing the brunt of the exchange rate fluctuation are hundreds of thousands of Armenians who live off remittances sent by their relatives working abroad. An elderly woman who converted $100 into drams in central Yerevan said she will have to ask her son living in Russia to send larger sums. “With the prices of food and everything else are going up, I can barely live on this $100,” she said. “They are depriving us even of that.”
“If had a job, I would not lose money,” said another pensioner. “But I am reliant on alms sent by my sister.”
The Central Bank of Armenia (CBA), backed by the International Monetary Fund, insists that the dram’s strengthening primarily results from a substantial increase in the amount of cash sent home by Armenians from Russia, the United States and Europe in recent years. It has repeatedly rejected allegations by opposition leaders and other government critics that the Armenian authorities have been “artificially” bolstering the dram to siphon off a large part of the hard currency flowing into Armenia. The bank also says a strong dram is suppressing inflation.
However, many Armenians distrust the official explanation and feel that the inflation rate is much higher than is shown by official statistics. “Goods priced in drams are also becoming more expensive,” said a young man who receives his salary in drams. “So I can’t be better off, it’s only the Central Bank that gains something.”
“They are deliberately depreciating the dollar,” charged another man. “Why are imported goods more expensive?”
Hrant Bagratian, a former prime minister critical of the current government in Yerevan, claimed that the dram’s strengthening could have “catastrophic” consequences for the Armenian economy. He said that while the CBA is right to assert that the dram has been pushed up by increased remittances, it should have loosened its monetary policy and increased the amount of drams in circulation.
“According to the Central Bank, the country has a trade deficit of $1 billion but gets $1.3 billion in remittances,” Bagratian told RFE/RL. “That means there is $300 million worth of extra cash left in the country. We don’t turn that surplus into investments and instead let it suppress the drams in circulation.”
(RFE/RL photo: Hrant Bagratian.)