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Central Bank Chief Admits Dollar Shortages In Armenia

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  • Central Bank Chief Admits Dollar Shortages In Armenia

    Central Bank Chief Admits Dollar Shortages In Armenia
    By Ruzanna Stepanian

    Armenialiberty.org
    Friday 16, June 2006

    The chairman of the Armenian Central Bank (CBA) acknowledged Friday
    that buying U.S. dollars in Armenia is now considerably more difficult
    than it was in the past, raising more questions about the official
    reason for the dramatic strengthening of the dram.

    The Armenian authorities maintain that the national currency has gained
    more than 30 percent in value against the dollar since December 2003
    because of robust economic growth and increased cash remittances from
    Armenians working abroad.

    However, the official theory about Armenia being awash with dollars
    seems at odds with the fact that many local currency retailers now
    routinely refuse to sell dollars to individual buyers, citing a lack
    of the U.S. currency in their coffers. The shortages again came to
    light with the dram's renewed surge against the greenback which began
    a month ago.

    Tigran Sarkisian, the under-fire CBA chief, blamed the bizarre
    phenomenon on currency traders. "We are now carrying out inspections
    at currency exchange offices and are finding widespread violations,"
    he told RFE/RL. "The problem raised by you does exist, and that problem
    is created by currency exchange offices. We will try to sort it out
    in the course of this year."

    "They are catering for the shadow economy, which is illegal," Sarkisian
    said without elaborating.

    The CBA has already controversially shut down many exchange offices
    in Yerevan in the last two years. Sarkisian would not say why buying
    dollars was not a problem even before the stabilization of the
    macroeconomic situation in Armenia in the mid-1990s.

    Opposition politicians and other government critics, who dismiss
    the official theory, claim that the Armenian authorities themselves
    buy "cheap" dollars and thereby siphon off a considerable part of
    hundreds of millions of dollars in cash sent home by migrant workers
    each year. Hundreds of thousands of Armenians rely on those transfers
    to make a living.

    Large-scale importers of fuel, wheat and other key commodities, all
    of them closely connected with the government, are seen as the prime
    beneficiaries of the stronger dram. Conversely, many Armenian exporters
    have been hit hard by the increased cost of their products. Some of
    them, including Armenia's main tobacco manufacturer, have threatened
    to move their production operations abroad if the dram appreciation
    continues.

    Sarkisian made it clear that he is untroubled by possible job
    losses. "Those enterprises that are not competitive must either close
    or file for bankruptcy or move to territories where they can operate,"
    he said. "We are creating an environment for competitive businesses."

    "We always tell our entrepreneurs that in the conditions of economic
    growth, exchange rates inevitably change and their salvation lies in
    a growth in productivity," he added.

    Official statistics show the volume of Armenian exports falling by
    nearly 8 percent to $253.7 million in the first four months of this
    year. Net imports, by contrast, rose by 13 percent to $584 million
    during the same period.
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