DOLLAR-DRAM DANCE: ARMENIAN CURRENCY TENDS TO DEPRECIATE AGAINST BACKDROP OF ELECTIONS
ECONOMY | 28.03.13 | 16:01
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By SIRANUYSH GEVORGYAN
ArmeniaNow reporter
The recent depreciation of the Armenian dram against the US dollar
is explained by a number of foreign and domestic factors, experts say.
As an external factor they bring the US dollar's appreciation against
the Euro as a consequence of the banking crisis in Cyprus. And among
domestic factors they point out the recent and forthcoming elections,
outflow of funds.
Wednesday, March 27, in average the USD-AMD currency ratio was $1 to
419.75 AMD. According to NASDAQ OMX Armenia stock exchange data, this
is a record-breaker for over the past six and a half years. The last
time the US dollar rate was higher in 2006, when it was worth 420.92
drams on June 19. To prevent the dram's depreciation the Central Banks
of Armenia last week put 13 million dollars in the stock exchange.
The situation is noteworthy that the volume of exports has grown,
remittances from abroad have grown too, and those two factors usually
restrain dollar appreciation, but the reverse is happening now.
Economist, former MP Vardan Bostanjyan says this dram depreciation
against the dollar is conditioned by a slightly activated business
atmosphere and Yerevan city council elections, when the political
parties participating in it start making expenses during the campaign
(Note: the official campaign is yet to start on April 7.)
"As a specialist in that field, I am convinced that the external
factors are not the only ones affecting the dollar-dram ratio. We
should view currency as regular commodity, product, the growing
demand for which brings increase in price. The demand has grown for
dollars, in particular because of elections, also because the business
atmosphere seems to be reviving, meaning that business volumes are
growing," Bostanjyan told media on Thursday.
Bostanjyan, however, brings as a reason for the dram depreciation also
the outflow of funds, considering it dangerous for Armenia's economy.
"In general, the outflow of capital is a rather negative thing, and
let's talk straight, that it is not something new for Armenia, that
has been the case for the past several years. That's one of the most
vulnerable points of ours. Because our business world is faced with
great difficulties in placing their money here and making it work,
naturally there comes the desire to move it out to somewhere else.
Capital commonly flows to where most favorable conditions are created,
that's not a discovery, but an axiomatic rule," says the economist.