Sharp rise in USD exchange rate in Armenia

dollarsUSD exchange rate rose dramatically today at various banks in Yerevan. Banks sell 1 USD for 380 as of now, which is up by 20% from yesterday’s selling rate of 307-308. Banks buy at USD at the rate of 320 – 330 AMD, up from yesterday’s 305-307.

In front of my very eyes the information screen was adjusted in Converse bank stationed in Yerevan’s Republic square to indicate the new selling rate of 380. I specifically asked the bank’s teller in disbeleif, thinking they perhaps misspelled a digit, putting 380 instead of 308. “Everything’s correct, sir!”, she smiled back, “I found it hard to understand myself at first”.

Dashing accross the square to HSBC I found their exchange rate at the selling level of 380, while buying for 320. Greedy bastards! Making 50 drams in every single dollar sold!

The Central bank website and most information websites at the moment of writing show the average rate of 305. RFE/RL reports the actual rate changes. I’m sure ther’ll soon be some ‘responsible media’ accusing it for spreading panic and hurting Armenia’s national interest.

Will anyone every think about Armenian people’s interest? The implications of SHARP dollar rise for the economy, where import surplus exceeds export 3 times, are hard to predict. I’ve been long critical of artificially high AMD rate, because it hurts exports. So maybe this is a good development.

However, most people who are paid AMD from the country’s struggling budget which is based on unrealistic prediciton of 9% positive economic growth in 2009 will surely suffer soon, as the price hikes for imported goods – basically everything we use today from sugar to oil will definately follow suit.

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60 thoughts on “Sharp rise in USD exchange rate in Armenia

    1. That does indeed explain a lot. I’ve got more interesting info, but need to process and perhaps will come up with a more detailed post later today.

    1. The Central Bank finally updated rate figures. USD dollar rate is 372.11, Euro rate has risen substantially – by 83 drams and is now – 469.52.

  1. The Central Bank website – http://www.cba.am is down, so there’s no way to see the official exchange rate. However, the head of Central Bank Artur Javadyan has stated that they expect the rate at the level of 360-380. And indeed, in the official data on foreign currency trading sent out by email they state $ 3,420,000 US has been traded today at the average rate of 372.11. The “Fund Borsa” (what’s the correct form in English – has closed with the exchange rate of 372.49 AMD per USD.

  2. Strange, all the international institutions (World Bank and International Monetary Found) encourage the Armenian government’s decision to leave free the exchange rates. Are they going to take any responsibility for what will happen later? Btw, What will happen?

    1. Like I said above – this might actually be a good development for our exports.
      >I’ve been long critical of artificially high AMD rate, because it hurts >exports. So maybe this is a good development.

      However, due to price hikes of all imported goods, which are already taking place as we speak – social tensions will increase substantially.

  3. The CBA capitulated earlier than I thought. One month ago, I estimated the US dollar to trade for 330-360 Dram on or about April 1, 2009. But the financial storm was more ferocious.

    Cheers!

  4. Actually, I predicted this rate (330-360 Dram) on or about December 20, 2009. Here is another prediction:

    The US Dollar will trade between 400-430 Dram in the next 1-2 weeks.

    Cheers!

    1. Thanx David. Since you have an actually well tested prediction skill, I’m more inclined to believe you, than Artur Javadyan, CBA chief, who says the rate is expected to remain within “360-380” range.

      1. Observer,

        The Voice of America or the Free Europe apparently broadcast that the dollar exchange rate in the exchange shops is 450 Dram. Does anyone have any first hand knowledge? Any confirmation or denial? During panic the rumors always abide.

        Thanks.

        1. David, I work for RFE/RL.

          In the boradcast you mentioned we had voices of ordinary people, who don’t quite understand what’s happening and complaining, saying the USD exchange rate has reached 450, 500, etc.

          However, the journalist specifically mentions in that story, that the rise of the rate on the first day has been within the range of 360 – 400.

          Yesterday evening, as I was coming home, I specifically changed a couple of Foreign Exchange points and found the dollar selling rate the level of 380 – 400.

          However, today, as the panic settles down, I’m sure it’s normalize within the 420-430 range you’ve been talking about.

  5. Are we going to see the dollar / dram rate trade out of proportion to the USD / EUR and the USD / GBP? Is there a demand for European currencies in the same manner that there is demand for the Dollar? I know the dollarisation of the Armenian economy was high back in 2003 but when the Dram appreciated I understood that we saw a 60%+ adoption rate of the Dram over the Dollar to hold wealth.

    Would love to know your thoughts!

  6. Henry,

    My recent analysis 2-3 days showed that the Dram was going to explode in a big time very soon and that’s what I told my friends and relatives in Armenia. The CBA has been lying in the last three months and they are lying now with their “estimates” of 360-380 Dram in 2009. Presently, Dram is a useless currency and will continue to be so unless fundamental changes are made in Armenia.

    Presently, EUR is a weak currency vs. US Dollar and will weaken in the intermediate term. Whoever keeps EUR in Armenia is taking a huge risk.

    Further, there is a good chance that the GBP will drop another 50% or so of its value against the US Dollar before the end of 2009. PM Gordon Brown is a clown and is clueless about the finance and the economy. Keeping GBP is almost suicidal.

    Sadly, the present regime, including the president, the prime-minister and the head of the CBA will not be held accountable for this debacle. That’s the tragedy for the ordinary people.

    Cheers!

  7. David,

    I agree about the fundamental of the Armenian system and its implications on the Dram. I agree the current rate is propped up by politics to keep the importing oligarchs making 100%+ in profits. I expected more from the PM as he was the lone bright spot this past summer. The President continues to disappoint and I am concerned how he continues to move the country closer to Russia. The financial implications for this mean coupling more enterprises to a sick Russia instead of a more open Middle East economy.

    In regards to the Sterling and Dollar relationship, it is a bit worrisome. If the UK economy has another RBS announcement, I think you are right we could see a GBP fall. However, if the GBP and USD reach parity, you will see an EU and a US response to push up the currency as that would be a very favourable advantage for growth in the UK economy once demand returns and the extra slack is worked out in the 4th quarter.

    The real question is: What is the true value of the Dram and is the economic output of the private sector working harder at providing import substitutes to provide GDP growth?

    Love the blog! I read every post.

  8. Hmmm… panic reigns. After Star supermarket closed down it’s shops for a ‘technical break’, now I’m told shops in Bangladesh district of Yerevan are shutting down.

    Meanwhile, people are dashing out to buy oil and sugar. My mom (she’s in Gyumri), after talking to me said she’ll go get 50 kilos of sugar! I told her she’s crazy, but now, as I think of it, maybe she’s not? :D

  9. Can you blame her after both ’88 and the dark years of ’92 to ’94? I have SMS from friends in Kapan, Goris, Varendis, Vandzor and Armavir that they are going to buy as much as they can now with their Dram even if they do not need it.

    The Armenian survival skills are amazing. People will always need consumables and they will find a way to preserve what purchasing power they do have.

    Cankanumem qo mayrik hajoghucyun.

    H

  10. Henry,

    First, let’s start from the end. I discovered this blog yesterday. I must say this is one of the best and current blogs re Armenia. So thanks should go to Mr. Observer.

    Second, I will withhold my comments about Mr. Tigran Sarkisian. Suffice it to say, being “bright” doesn’t translate into doing “right.” Being a former head of the CBA he should have known that the government cannot fight the market and artificially supporting the Dram against the US Dollar was financially foolish. Now, there is always politics involved, but that’s another conversation.

    Third, I am glad you picked on it that the GBP would get to parity. I didn’t mean it would drop another 50% from the current rate. So to clarify for other readers, the GBP was trading at 2USD and will likely fall to parity, i.e. 1GBP=1USD before 2009 is over. Even the former head of the Bank of England recently said that “nobody knows how much money is needed to capitalize the British banks” (its a paraphrase). Do you know? I definitely don’t know. Which makes it really, really scary. Further, you are overly optimistic about the 4th quarter… (wink)
    The EU zone is in worse economic shape than the USA.

    Fourth, the real answer to the real question is really simple. The free market will determine the “true value” of Dram. I don’t decide it, you don’t decide it. Unfortunately, the economically illiterate politicians in Armenia, including the ruling political elite believe they decide it. (Pathetic.) Well, maybe for three month the CBA could hold the Dram against the market trends, but in the end, its panic and demoralization.

    Moreover, its hard for me to give the FINAL answer as to the “true value” of Dram, since I don’t have the complete information I need to give an estimate (see, I only estimate). The market is smarter than I (that’s for sure, and the proof is that even I lose money in the stock market, hahaha…). The true value of the Dram depends on many factors, but the account deficit will be a major indicator. If my understanding is correct, Armenia imports three to four times more than it exports in US dollar terms; therefore it was unreasonable to make-believe as the political elite would have you, that the Dram can stay so “strong” against the dollar. Think about it – every major currency (EUR, GPB) and other minor ones, such as Ruble all dropped in value vs. the USD, but somehow Armenian Dram was immune to that. Hahaha… 1 month ago the PM was saying “Armenia is well prepared to weather this economic and financial storm.” He was lying then and he is lying now.

    Cheers!

    1. Ani, that was just a big blip I guess. Ruble is struggling itself, so even if it was a test of public opinion, it failed…

    2. It is a farce! Russia is not showing any improved fundamentals. They have very few value-add sectors. Natural resources are important but do not lead to an overall development of opportunity.

      As Europe enters crisis, Ukraine folds, Central Asia trembles, who wants to adopt a currency that may or may not be worth anything? It is but another attempt of “Mother Russia” to build satellites and have greater control.

    3. Whenever I hear that talk about Armenia in Ruble zone, I imagine a flea on a dog. Even though the dog may not be in good health, the flea is still not a big bother.

  11. IMF RESPONSES TO QUESTIONS ABOUT THE EXCHANGE RATE ADJUSTMENT
    1. What is the IMF’s view about the exchange rate adjustment announced by the CBA?

    The IMF strongly supports the decision of the Central Bank of Armenia to return to a floating exchange rate regime. In recent days and weeks, the CBA has had to sell large amounts of dollars almost every day in its attempt to keep the exchange rate stable at around 305 dram per dollar. This policy has proved to be unsustainable. Moreover, maintaining a dram that is too strong is bad for Armenia’s competitiveness. A weaker, cheaper dram will help to make Armenian exports more attractive.

    2. Why is a floating exchange rate necessary? Why not just move to a new, depreciated, fixed rate?

    The IMF has for many years been of the opinion that a floating exchange rate regime is the best choice for the Armenian economy, because Armenia has a small, open economy that is dependent on what happens in the rest of the world. The problem with a fixed exchange rate is that it is very difficult for any central bank to correctly choose the optimal level of the exchange rate, and in fact, the optimal level is constantly changing, depending on what happens to international prices, the economies of trade partner countries, etc. If the exchange rate is fixed at a level that is too strong, like we believe was recently the case in Armenia, this means that Armenian exports become too expensive, which negatively affects economic growth, and could lead to a loss of jobs and an increase in poverty. On the other hand, if the exchange rate is fixed at a level that is too weak, this means that the economy can overheat, which can lead to high inflation. Therefore, it is best to let the exchange rate float and let the market find the optimal level at any time.


    3. Why was the rate previously appreciating?

    For the last several years, there were large inflows of foreign currency, mostly dollars, into Armenia (in the form of remittances, foreign direct investment, exports, and foreign aid). Expected appreciation also led to dedollarization, which further increased the supply of dollars. More supply of dollars meant that the price of the dollar was falling, which is why the dram was previously appreciating against the dollar.


    4. Why does the rate need to depreciate now?

    Because of the global financial crisis, there is a significant reduction of foreign currency inflows into Armenia. In particular:
    • Export prices have fallen significantly (copper and molybdenum prices lost about 2/3 of their value), leading to lower export revenues for exporters.
    • Global demand for Armenian exports has fallen, meaning a further reduction in export revenues.
    • The Russian economy is experiencing serious problems, meaning a reduction in remittances (money transfers) from Russia to Armenia, as well as in foreign direct investment from Russia
    In short, there are now significantly less dollars coming into Armenia than before. Now that the CBA has decided to let the exchange rate float and to let the market determine the equilibrium level for the dram, fewer dollars means that the price of the dollar should go up, which means that the dram should depreciate.


    5. By how much will the dram depreciate?

    Neither the CBA nor the IMF can tell you exactly by how much the dram will depreciate, because under a floating exchange rate regime, it is the market that will determine what is the optimal level of the dram, and this depends on the total demand and supply of dram and dollar in the economy.
    However, we have tried to estimate the so-called equilibrium exchange rate for the dram, and based on these estimations, we expect that the dram will depreciate by about 20 to 30 percent. We in fact used three different models for estimating the equilibrium exchange rate, and each model gave a similar result, which was that the dram is currently overvalued by 20 to 30 percent (see chart). We will soon publish a paper on our website where we explain the details behind these estimates. The CBA has also made similar estimations, posted on its website, which are within the same range.

    Note that Armenia is only just catching up with other countries in the region: Belarus and Kazakhstan both recently devalued their currencies by 20 percent, and Georgia devalued by 11 percent. The Russian economy has been the most seriously affected, due to the large fall in oil prices, as a result of which the ruble has gradually lost 35 percent of its value. For Armenia, we expect less depreciation than in Russia, but more depreciation than in Georgia. Probably it will be something similar as in Belarus and Kazakhstan. However, from now on, it will be the foreign exchange market that will determine what the new dram rate is going to be on any given day.

    6. Will the central bank continue to intervene, and if so, when?

    The authorities’ program will allow for some, but only very limited central bank interventions. The fact that the CBA has decided to return to a floating exchange rate does not mean that the CBA will not intervene at all. Our recommendation for Armenia is that central bank interventions should be used only to reduce excessive exchange rate volatility (that is, to avoid large changes from one day to the next), and the central bank should not target a specific level or specific path for the exchange rate. By the way, the CBA can use these limited interventions also to purchase foreign exchange, not just to sell it.

    7. What will you (or the CBA) do if the exchange rate overshoots?

    We are not concerned about a temporary “overshoot”. In fact, it is quite normal for exchange rates to overshoot, that is, to temporarily go above the expected equilibrium level. It is therefore possible that we will see first a fairly large depreciation, followed by some appreciation. If this happens, there may not be any need for the CBA to intervene, because if the exchange rate overshoots sufficiently, people will start using this opportunity to sell their dollars for a very good rate, and as a result, the exchange rate will come back down to its equilibrium level.

    8. Is there a risk of bank failures? Should we take our money out of the banks?

    There is no reason why Armenians should take their money out of the banks. In fact, the banking system is very liquid, very well capitalized, and very well prepared for this depreciation. In particular, banks’ liquid assets to total short-term liabilities are above 100 percent, and their average capital adequacy ratio (CAR) is well above the CBA requirement of 12 percent (it was 27.5 percent at the end of 2008). In addition, there is a good deposit protection system in place. And finally, the CBA stands ready to inject more money into the banking system if needed.

    9. Why is there a need for an increase in the refinancing rate?

    A temporary increase in interest rates is needed for several reasons. First, it will help to increase confidence in the banking system, by rewarding Armenians for keeping their money in the banks. Second, it can help to reduce the inflationary pressures that are likely to result from the depreciation, and sends a signal that the central bank is still serious about inflation. Finally, it will help to reduce incentives for banks to engage in speculative behavior, because it will become more expensive for banks to borrow dram from the central bank.

  12. Observer,

    Excellent post. Good job. Overall, the IMF analysis is good. I won’t pick on certain assertions made by the IMF.

    However, according to the IMF, the Dram was overvalued between 20-30%, which puts the US Dollar between 366 to 396.5 Dram. I maintain the USD will trade above 400 Dram in a very near future. I will further observe whether the CBA, again foolishly, will use its remaining $900,000,000 in foreign reserves to (unsuccessfully) fight the market. The CBA wasted (I repeat, wasted) almost $500,000,000 in its stupid act of “maintaining” the Dram’s exchange rate. That’s criminal in my book and the head of the CBA should be hanged publicly (no pun intended) along with Tigran Sarkisian and Serj Sarkisian.

    Hahaha…. that’s a tall order in a short Republic of Armenia.

    Sad!

      1. Sorry, I checked and you are right. They spent $50 million during the last 3 days. During the past 6 months they have spent about $800 million to keep Dram strong.

        1. Nazarian,

          :-)

          I started tracking the CBA from late December 2008. According to the IMF, the CBA had official reserves of $1.5 Billion.

          What is the source of the $800 million that the CBA spent in the past 6 month. My gut feeling tells me that the CBA started wasting the few precious dollars it had since August 2008, but I haven’t found a reliable source yet to confirm my suspicion.

          Cheers!

  13. Did you guys just get the IMF press release? Says they are going to give $540,000,000 to Armenia which half can be used now. Guess the boys in power get another pay day!

    1. Hi Henry, per your request:
      Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), issued the following statement on Armenia today:

      “After many years of strong economic performance, Armenia has been adversely affected by the global economic and financial crisis. In response, the Armenian authorities have put together a strong and credible economic program to address the deterioration in Armenia’s external outlook, restore confidence in the currency and financial system, and protect the poor.

      I will therefore recommend that the IMF Executive Board approve a request for a US$540 million, 28-month Stand-By Arrangement. The Executive Board is expected to meet to discuss the program later this week. Armenia would be able to draw about US$239 million immediately after Board approval.

      The comprehensive policy package developed by the Armenian authorities in consultation with IMF staff includes the return to a floating exchange rate regime (allowing the exchange rate to move in line with market fundamentals, so as to cushion the economy from the external shocks and safeguard foreign exchange reserves) with supporting monetary, fiscal and financial sector policies, and well-targeted structural reforms. The authorities are also taking measures to help offset the economic downturn and mitigate the impact of the economic crisis on the poor.

      The strong measures that the authorities are taking justify the exceptional level of access to Fund resources (equivalent to 400 percent of Armenia’s quota) and deserve the support of the international community,” Mr. Strauss-Kahn said.

    2. Since when did the RA government leave the floating exchange rate policy? It is like the IMF knew about policy that we did not?

      1. No, during Robo’s rule, it was pretty market based. Research showed a reasonable correlation to economic fundamentals. I really think it is the current President and his party who have sought to consolidate power. I think we saw them manipulate the exchange rate starting with the election cycle.

        1. I think the price setting issue comes with Tigran Sargsyan. He started the whole process as CBA chief about 8 years ago (and Nazaryan’s right – beginning of Kocharian rule).

          With Tigran Sargsyan’s appointment as Prime Minister after Serge Sargsyan’s inauguration, Tigran Sargsyan’s control over the economy grew, that’s perhaps why Henry feels it’s the ‘current President’ doing it.

  14. Let’s see: “[I]n response, the Armenian authorities have put together a strong and credible economic program…” blah blah blah…

    The economic crisis started in July 2007, with the US stock market crashing after October 2007. I knew the crisis was coming in October 2007!!! Why didn’t the so-called leaders know about it? How about resigning from their posts? How about publicly apologizing to the populace for bringing misery? (You can see I am upset.)

    That’s about one year and seven months from July 2007. So, it took the idiotic and economically illiterate political elite at least one year and four months to “put together” a plan. Ouch! The same “leadership” who, largely, put Armenia in such a predicament, is now going to rescue the motherland. And these are the leaders who will pull Armenia out of the global financial crisis? If anyone believes that, I got the Brooklyn bridge for sale.

    Further, what exactly is the program? What makes it so “credible?” How do we know its “strong?” Where is that mythical plan?

    Moreover, why does it take a consultation with the IMF to return to the floating exchange rate? How about Economics 101? Ahhh~~ they would all flunk the test.

    I feel sorry for Armenians. Cavali e. Anhuys u voxbergakan.

    1. barev,

      I read the Bloomberg story. But I am looking for an “official” database from the CBA and/or the Ministry of Finance. I didn’t track the USD/Dram exchange until December 2008.

      Further, according to my rough calculations, in the end of February 2009, the CBA has approximately $900,000,000 in foreign currency reserves (some in Dollars, some in Euros, the rest maybe in GBP, Ruble, etc.). Surely, the CBA was holding EUR and RUBLE as part of its holdings; that’s a big mistake since both EUR & RUBLE have been dropping in value against the USD.

      The lunatics are running the asylum. In a civilized society with leaders having an ounce of integrity, the entire government should have immediately resigned after the Dram debacle. But we are dealing with crooks, thugs and liars…

  15. David,

    You obviously knew more than most economists, bankers and politicians. You should be running the Federal Reserve!

    Despite the incompetence of the Armenian political class there is little they can do. This is an international economic crisis which is right now beyond the control of any one country. There is a ‘flight to quality’ to the U.S. dollar from other currencies. Paradoxically the enormous spending by the US resulting in unheard of deficits and debt will ultimately lead to inflation and debasement of the dollar.

    1. R,

      You write “[D]espite the incompetence of the Armenian political class there is little they can do.” Resignation is one option. Collective hara-kiri in the Central Square, with the public applauding, will be a memorable spectacle. Not wasting $500,000,000 since late December 2008 is yet another option. That sum could have been used to provide credit to small businesses. Or given to the orphans and the widows. I understand 31% of the population lives under $2 a day. $500M will pay $2 per day for 685,000 people for the entire year (say 2009 or 2010). And next time the circus known as the Armenian government with its leading clowns (the Armenian President and the PM) say the economic crisis will be over in 2009 or even 2010, they are lying.

      I will debate the entire cabinet any time, any place and it would be a sorry event! We can make it a pay event with the entire proceeds going to a charity.

      Cheers!

      P.S. We can talk about the USD and its flaws some other time, since I know a lot more than about Dram. After all the topic is the Dram’s collapse. But I will leave you with this thought – if the USD is a waste paper, the Dram is a toilet paper.

  16. CBA can’t have less than one bln dollar in reserve,since there is regulation to keep reserve equal to 3month import amount.
    I see to main reasons of what happened yesterday.
    1. IMF ultimatum to Armenia
    2. As usual Russia made everything to handover Armenia to US and Europe with their delay of 0.5 bln credit.

    1. Tigran,

      You may be right. There must be a statute or a regulation of minimum foreign currency reserves the CBA can have. If you have the source of the statute or the reg, I would be much obliged. Assuming the CBA can’t have less than “one bln dollar in reserve,” combined with my calculations that the reserves were approximately $900 million at the end of February 2009, the CBA had no choice but to capitulate.

      That’s why the circus clowns went to Russia to borrow money and the Russians said “You can’t use our precious dollars on stupid exercise to fight the market.” Then the clowns ran to the IMF, which has a policy of free-floating currencies. The IMF forced the CBA to float the Dram in exchange for the immediate stand-by loan.

      The CBA waited until March 1, 2009 for the anti-government protest, then signaled its cronies to exchange the remaining Drams into the USD before noon, and at noon or so, made the official announcement of the floating rate. Thieves!

      1. I’ve been hearing about this 1bn dollar requirement from a couple of economic experts here, although I tried hard to find it in the laws at http://www.arlis.am and wasn’t able to do it. Perhaps, its an internal CBA regulation?

        1. Observer,

          It could be any of the followings: (1) the Constitution of the RA (less likely), (2) the statutes passed by the legislature (more likely), (3) the banking regulations (maybe), (4) the IMF or World Bank or BICS requirements (highly likely). I am not a big fan of “experts,” thus I prefer the original source. But thanks for looking into it.

        2. Observer,

          According to the Ministry of Finance (http://www.minfin.am/), the import of goods in 2008 was $4,411.6 million USD. If we take three months or 1/4 it comes to $1,102.9 million or $1.1 billion USD. Maybe the so-called experts are using this number. But trade is not a one-way street, but a two-way highway, i.e. imports AND export. So the so-called experts are probably blowing smoke. No wonder, every time I hear “experts,” I smile.

          Maybe the number arrives from the current account deficit in 2008, which is $932.1 million USD.

          1. From what I was able to find out so far – there is no legal requirement for the CBA to have any specific amount of foreign reserves.

  17. Hi everyone!
    It’s two years that I live in Italy but in next few days I think to come back to Armenia.
    I urgently need information about the possibility in these days:
    – to change Drams in Euro or Dollar without any limit send this money abroad to pay some commercial invoices (but … are you sure about new rate change?!?!?!? I can’t understand how it can happen!!!);
    – to receive Euro or Dollars in my armenian bank account (and change them in Dram) without any limit.
    Thank you in advance!
    Hasmik

    1. Hasmik, I am dead sure about the rate change. It is a fact. Dollar trades 380-390 in exchange shops accross the city.

      All limitations introduced to currency exchange which I’ve talked about in a previous post are gone now – so you can exchange as much as you like and send it wherever you like. I specifically checked this for you today, so I’d welcome a ‘thank you’ from you :)))

  18. Thank you, Observer for general information, a little bit less for bad news :))))!!!!
    Hasmik

  19. The story actually made it into the New York Times (rare event for Armenian news):

    Armenians rushed to buy bread, butter and other staples on Tuesday and stores shut down in panic after the government announced it would let the currency fall and was seeking a bailout from the International Monetary Fund. Banking authorities said the national currency, the dram, could lose a quarter of its value, and prices for imported goods were expected to rise sharply.

    ————————
    Country story above it was from (you guessed it) Zimbabwe, but that one was actually good news about an opposition member being released from jail…

  20. YEREVAN, March 4. /ARKA/. Economic entities should not take the advantage of the situation on the Armenian currency market for raising the prices, Press Secretary of the country’s State Commission for Protection of Economic Competition (SCPEC) Armine Udumyan said in commenting the fever caused by fall in national currency rate and rise in process for some foodstuffs.

    Tuesday, the Board of the Central Bank of Armenia (CBA) decided to return to the policy of the floating rate due to worsening trade conditions under the global financial and economic crisis, as well as due to slowing down capital inflow. According to CBA experts, exchange rate is expected to range between 360 Drams and 380Drams for $1 in 2009.

    A rise in prices for some foodstuffs has already been recorded and people, giving way to panic, started buying first priority and foodstuffs in supermarkets and shops.

    The Press Secretary of the Commission said that nobody has a right to dictate economic entities under market economy conditions, but price rise should be in proportion to the processes going on. The current situation should not be used as an occasion for abuses and anti-competitive agreements between economic entities with dominating positions on the market, she said.

    All cases reported to the Commission are currently considered. Economic entities applying inadequate price rise, will be called to account under the law, she said. The previous 25-item list of goods to be monitored is currently extended and contains up to 40 articles. The monitoring will be implemented on an hourly basis, with the monitoring results to be summarized at the end of the day. The target group set up is to take particular measures based on the monitoring results. –0–

    http://www.arka.am/eng/economy/2009/03/04/13468.html

    This is amusing. The economic team navigating the little boat called Armenia in a major storm of global financial collapse is clueless. On the one hand, the Commission claims that nobody has a right to detemine the prices under market economy conditions, and on the other hand the Commission will determine if the price rise is proportionate or not. Which is it – the free market or the government commission? Is the Commission ignorant or just thinks that we are ignorant?

    Moreover, when the importing oligarchs were being subsidized by the population at large, by keeping the Dram artificially high vs Dollar, these thugs were not taking advantage of the situation!?!? Right! Does she smirk when she lies or is she just a moron?

    In addition, the entire Board needs Finance 101. I will donate my time and expertise and gladly give them an unsubsidized seminar. For the really dumb, I will charge Dollars (present exchange rate) and for the decent but misguided officials, I will take Drams (former exchange rate). :-)

    Heck, the Ministry of Finance and the CBA can also come. Are you listening, Mr. Prime Minister?

    Lastly, people are buying stuff, in part, because the Dram is a useless currency. And will continue to be as such for a foreseeable future.

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