After months of relative stability Armenia’s national currency, the dram, has resumed its steady depreciation against the U.S. dollar, losing almost 4 percent of its nominal value since the beginning of this month.
The process accelerated this week, with the exchange rate set in inter-bank currency trading reaching nearly 407 drams per dollar on Friday, down from 392 drams per dollar on Monday.
The dram was trading at an average of 389 per one dollar in mid-January, making it more than 6 percent weaker, in nominal terms, against the greenback than a year ago.
The Central Bank of Armenia (CBA), which plays a key role in the authorities’ exchange rate policy, on Friday declined to explain the renewed dram depreciation, saying that it will comment later on.
Hrant Bagratian, an economist and senior member of the opposition Armenian National Congress (HAK), said the current slide would have been steeper without the CBA’s hard currency interventions in the local financial market. He claimed that the bank has spent $300 million for that purpose in recent months.
Some currency retailers in Yerevan said that Armenians have increased dollar purchases in recent days. “Demand in the dollar is increasing,” Lusine Chalabian, the owner of one currency shop, told RFE/RL’s Armenian service (Azatutyun.am).
Bagratian attributed the exchange rate fluctuations to what he described as slowing economic growth and a modest increase in remittances from Armenians working abroad. He alleged that the increased dollar demand is also the result of large-scale vote bribes distributed across the country ahead of and during the May 6 parliamentary elections.
The former prime minister estimated that their total amount is an equivalent of $100 million. “That money is now also being converted into dollars,” he told RFE/RL’s Armenian service.
The Armenian authorities have repeatedly denied allegations of vote buying made by opposition politicians, challenging them to come up with factual evidence of the illegal practice.
The Armenian currency dramatically appreciated against the dollar and the euro during several consecutive years of double-digit economic growth that came to an end in late 2008. The global financial crisis caused it to fall sharply in the following months.
The dram rallied against both hard currencies as the country began recovering from recession in 2010. In a December 2010 report, the International Monetary Fund warned that it has grown overvalued by 10-12 percent.
President Serzh Sarkisian acknowledged in March 2011 that the dram’s strengthening in 2010 and before had a negative impact on Armenian manufacturing firms. Sarkisian predicted its “very slow and stable depreciation” in the months to come. The dollar was worth 368 drams at the time.
“In general, dram depreciation is not bad for exports,” Bagratian said. “But it would not have led to severe socioeconomic consequences [for ordinary Armenians] had our economic competitiveness risen parallel to it, had the economy gotten rid of monopolies. But since that is not happening I think that the Central Bank will continue to fight against this depreciation [with dollar sales.]”