Last week saw another fall in foreign currency exchange rates. Exchange rates have been falling steadily for several years now, however this latest incident was extremely severe. The dollar alone fell from 315 drams it traded for on Wednesday to 285 on Saturday evening, a fall of around 10% of it’s price. Amid the uncertainty, banks and exchanges around the city continue to trade with a discrepancy of 10 drams or more between the selling and buying prices for the dollar.
This latest plunge follows a decision by the Central Bank to increase the reserve rates for foreign currency by a staggering 4%. The increase from 8% to 12% both forced banks to sell foreign currency and slashed the money supply.
The central bank continuously keeps explaining the strengthening of the local currency both by rapid economic growth and increased foreign transfers. State officials apparently take advantage of public ignorance of financial matters by blatantly accepting that they are doing nothing to increase the money supply proportional to the growth of the economy. It this latest incident it is apparently doing exactly the opposite. The argument that transfers have increased has also been questioned by opposition figures.
Despite the asserted strengthening of the dram, it’s buying power has steadily declined for the past years. This is mostly due to the fact, that a large portion of the country’s import is monopolized, leading to businessmen enjoying super profits without being faced by competition that would force them to lower prices. This is also the main ground for speculation, that the Central Bank is deliberately allowing the currency to strengthen unhindered. In a talk show just before the incident, former prime minister Hrant Bagratyan talked extensively about the economic situation. He noted a recent incident in which the price of sugar, which is the monopoly of parliament member Samvel Alexanyan, was doubled overnight. The old price was restored a day afterwards, however this was followed by another plunge in foreign exchange rates.
Exporters meanwhile have been continuously complaining about the situation. The effect on the large part of the population that relies on transfers from relatives working abroad or receives salaries in a dollar equivalent has also been harsh.