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September 19, 2007

ACNIS Examines “Performance” of the Armenian Dram

Yerevan—The Armenian Center for National and International Studies (ACNIS) convened today a policy discussion to consider the economic and political causes and consequences of the unprecedented recent strengthening of the Armenian national currency, the dram. The meeting brought together leading analysts, policy specialists, public and political figures, and media representatives.

In her opening remarks, ACNIS research coordinator Syuzanna Barseghian stated that the dram’s exchange rate and related inflation indicators are under constant watch. “This is so because even though the explanations given by certain Central Bank officials with reference to the fluctuation in the rate of exchange seem self-contradictory, this matter relates directly to the people’s living standards,” she said. “According to these ‘explanations,’ the ‘performance’ of the dram as a rule depends on the ‘fluid’ exchange rate as well as global developments, but it is evident that as an outcome of the artificial increase in the value of the dram, a certain clique is making ‘big money.’”

In her address, economics professor Zoya Tadevosian focused on the impact of the dram’s exchange rate on the Armenian economy and pointed to the main factors which led to the buoying of the dram. She underscored that these factors are subjective because in line with economic norms the prices of consumer goods usually go down in such cases. In the Armenian case, however, this did not happen; annual inflation has continued to rise, whereas the total financial loss of the population has exceeded 50 percent. “The national currency must not artificially gain value in a country where the economic situation is disastrous, the poverty level is high, and the unemployment rate hovers near 40 percent,” Tadevosian noted. In her firm belief, growing poverty is the most important social consequence of the erroneous monetary policy, while the currently huge imbalance between imports and exports is its most unfavorable economic consequence. “The exporters are unable to send their goods abroad because the importers, receiving super-profits, have put the country under an economic blockade.”

In his turn, former MP and leading economist Dr. Tatoul Manasserian spoke about the geopolitical causes for the fluctuation in the US dollar’s rate of exchange and called attention to the present-day situation which has come about as a result of economic deviations. In Manasserian’s words, the volume of foreign money transfers, the political situation, the country’s external debt and its unappealing investment environment are among the numerous factors which have an impact on the strengthening of the dram. “The officialdom of our state, and specifically the Public Services Regulatory Commission, is the architect behind—and the promoter of—inflation,” Manasserian stated. He also expressed a conviction that the events occurring in Armenia’s currency market, and particularly the sharp price increases, have an adverse effect first of all on the socially insecure and specifically on the wallets of those who continue to subsist on money transfers from their relatives living abroad.

The policy roundtable concluded with an exchange of views and policy recommendations among director Heghine Manasian of the Caucasus Research and Resource Center; director Movses Aristakesian of the Center of Economic Rights; Mikael Mikaelian from the State Commission for the Protection of Economic Competition; ACNIS director of administration Karapet Kalenchian; deputy chairman Edward Antinian of the Liberal Progressive Party; economic analyst Haik Gevorgian of the Haikakan Zhamanak daily; and several others.

In the shared view of most roundtable participants, the fluctuation in the exchange rate is artificial, and it has a negative impact on the nation’s standard of living and the viability of its local exporters. As maintained by the discussants of the day, the devaluation of the US dollar is primarily a result of arbitrary fiscal and monetary policy and, contrary to what is said by many officials in charge of the financial sector, it has little connection with the developments in the world market.


Founded in 1994 by Armenia’s first Minister of Foreign Affairs Raffi K. Hovannisian and supported by a global network of contributors, ACNIS serves as a link between innovative scholarship and the public policy challenges facing Armenia and the Armenian people in the post-Soviet world. It also aspires to be a catalyst for creative, strategic thinking and a wider understanding of the new global environment. In 2007, the Center focuses primarily on civic education, democratic development, conflict resolution, and applied research on critical domestic and foreign policy issues for the state and the nation.

For further information on the Center call (37410) 52-87-80 or 27-48-18; fax (37410) 52-48-46; email root@acnis.am or info@acnis.am ; or visit www.acnis.am.

 

 
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