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WHAT RODRIGO KNOWS
James Hakobyan
Lragir.am
20 June 06
The IMF's Managing Director Rodrigo de Rato announced June 18 in
Yerevan that the revaluation of the Armenian national currency
sustains the economy in Armenia, relieves the consequences of high
energy prices and investments grow, reports the news agency ARKA.
However, his assessment means it is time for de Rato to take up a
course in economy rather than the necessity for revaluation of the
Armenian dram. If the revaluation of the Armenian currency helps
eliminate the consequences of the high energy prices, de Rato should
have also said for who.
It is suggested that the consequences of the high energy prices
impact two main groups of consumers: people and industries. After the
revaluation of the dram people did not start paying less for energy.
So, the consequences of expensive energy were not relieved for
people. And those people whose income is in dollars have to spend more
dollars to buy drams and pay for energy. In fact, they suffer losses
due to the revaluation of the Armenian dram. As for producers, energy
prices did not change for them either. Moreover, if they export their
products, they also suffer losses from the revaluation of the dram,
for the cost of production increases. They sold their product abroad
for x dollars, in Armenia they exchanged x dollars for 2x drams and
paid taxes, for energy, salaries, etc. Now and after every stage of
revaluation of the Armenian dram they have 1x drams instead of the
former 2x drams. Therefore, one does not need sophisticated knowledge
of economy to realize that producers need to sell their product at a
higher price abroad or to invest part of their income to produce an
equal amount of products.
In fact, we deal with an obvious decline in production. For Rodrigo
de Rato, only he knows what he deals with. His assessment is probably
based on the calculation that the revaluation of the dram cut down
the prices of imported products because if formerly x drams revenues
of importers were exchanged for 1x dollars, after the revaluation of
the x drams revenues of importers are exchanged for 2x instead of the
former 1x drams. Hence, their income grows. They will keep these huge
profits to themselves or invest in importing business again, because
we saw that local production, to put it mildly, is not profitable. We
not only saw it but we hear it from local producers. The companies,
who sell their products in Armenia, may not suffer losses. On the other
hand, however, their business will not grow unless their production
is exported. It cannot grow for the simple reason that the Armenian
market is very small. So, if Armenian production is not exported,
the Armenian economy is unable to develop, because the market is very
limited. Hence, only de Rato knows how the revaluation of the dram is
going to develop the economy. As for the question why the price of the
imported fuel does not decrease in drams despite the revaluation of
the dram, it is known to someone else, and most probably Rodrigo de
Rato has had the opportunity to ask them in Armenia, because he met
with the government of Armenia. However, probably he did not ask them
anything, otherwise he would not have announced what he announced. And
he should not have announced what he announced, because in a healthy
economy the national dram would not revaluate and foreign currency
would not depreciate by several percentage points within only a
week. Such an economy cannot attract investments, and perhaps only
Rodrigo de Rato knows who would make investments in such an economy.
James Hakobyan
Lragir.am
20 June 06
The IMF's Managing Director Rodrigo de Rato announced June 18 in
Yerevan that the revaluation of the Armenian national currency
sustains the economy in Armenia, relieves the consequences of high
energy prices and investments grow, reports the news agency ARKA.
However, his assessment means it is time for de Rato to take up a
course in economy rather than the necessity for revaluation of the
Armenian dram. If the revaluation of the Armenian currency helps
eliminate the consequences of the high energy prices, de Rato should
have also said for who.
It is suggested that the consequences of the high energy prices
impact two main groups of consumers: people and industries. After the
revaluation of the dram people did not start paying less for energy.
So, the consequences of expensive energy were not relieved for
people. And those people whose income is in dollars have to spend more
dollars to buy drams and pay for energy. In fact, they suffer losses
due to the revaluation of the Armenian dram. As for producers, energy
prices did not change for them either. Moreover, if they export their
products, they also suffer losses from the revaluation of the dram,
for the cost of production increases. They sold their product abroad
for x dollars, in Armenia they exchanged x dollars for 2x drams and
paid taxes, for energy, salaries, etc. Now and after every stage of
revaluation of the Armenian dram they have 1x drams instead of the
former 2x drams. Therefore, one does not need sophisticated knowledge
of economy to realize that producers need to sell their product at a
higher price abroad or to invest part of their income to produce an
equal amount of products.
In fact, we deal with an obvious decline in production. For Rodrigo
de Rato, only he knows what he deals with. His assessment is probably
based on the calculation that the revaluation of the dram cut down
the prices of imported products because if formerly x drams revenues
of importers were exchanged for 1x dollars, after the revaluation of
the x drams revenues of importers are exchanged for 2x instead of the
former 1x drams. Hence, their income grows. They will keep these huge
profits to themselves or invest in importing business again, because
we saw that local production, to put it mildly, is not profitable. We
not only saw it but we hear it from local producers. The companies,
who sell their products in Armenia, may not suffer losses. On the other
hand, however, their business will not grow unless their production
is exported. It cannot grow for the simple reason that the Armenian
market is very small. So, if Armenian production is not exported,
the Armenian economy is unable to develop, because the market is very
limited. Hence, only de Rato knows how the revaluation of the dram is
going to develop the economy. As for the question why the price of the
imported fuel does not decrease in drams despite the revaluation of
the dram, it is known to someone else, and most probably Rodrigo de
Rato has had the opportunity to ask them in Armenia, because he met
with the government of Armenia. However, probably he did not ask them
anything, otherwise he would not have announced what he announced. And
he should not have announced what he announced, because in a healthy
economy the national dram would not revaluate and foreign currency
would not depreciate by several percentage points within only a
week. Such an economy cannot attract investments, and perhaps only
Rodrigo de Rato knows who would make investments in such an economy.