Podcast: Dram is not floating, it's just taken for a swim

Armenian bloggers noted a certain trend this week: on Mary 1 the opposition leader Levon Ter-Petrosian declares that “the country is falling into abyss”. On March 4 the country nearly falls into that very abyss – with the national currency – Armenian dram loosing 20% or more of its value in a matter of hours.
While some bloggers share their views of the opposition leader and the authorities – telling in quite frank terms what they think of him, others explore the price hikes in Yerevan’s supermarkets and the situation from the Dram-Dollar battle grounds – the exchange shops and banks.
Meanwhile a blogger – Smbat Gogyan makes an astonishing revelation: “On March 3, at 12:35 I found out, that on the next day, on March 4 the official exchange rate will be set at the level of 370 AMD per 1 USD . My best friend called me and said literally the following: Central bank have called all the banks and warned them, that on March 4 the official rate will be set at 370”.
“Floating rate” is supposed to mean that the Central Bank does not decide the exchange rate. Instead, the exchange rate is decided by the market, and the Central Bank, having observed the market trends, defines the exchange rate. In other words, the blogger concludes, what we have now is not a ‘floating exchange rate’. It’s just that the ‘dram is taken for a swim’.
Listen to all of the above and more in our weekly Armenian language podcast featuring weekly reviews of the Armenian blogosphere, interviews with bloggers, IT and new media specialists, technology news and more by downloading the 1,3 Mb audio mp3 file or listen to it online by clicking the player icon below.

4 Comments

what is amazing is that the central bank of Armenia had never before admitted that they were manipulating the dram, and now all of the sudden they declare that the dram will be “floating”. What is sad is that instead of manipulating the dram towards supporting export (job creating) type businesses like China has been doing, the central bank has instead been manipulating the dram to help import oriented businesses causing Armenia to become an import dependent nation even for majority of its food. There has yet to be an explanation of why the central bank spent so much of its reserves to keep the Dram so strong, against market conditions. What is even more sad is that it wasn’t the realization of Armenia’s gov’t that they have been making a mistake, which caused their sudden change in policy, the change to “floating” rate has come as a result of IMF and World Bank demanding a more market based dram in order to release the $540 million funds to Armenia. So in essence, Armenia’s leaders have yet to learn to think on their own for what is best for the country and people.

David

07.03.2009

In a free market, the CBA should not be manipulating anything, including the Dram. Whether its to support the importers or the exporters. Period. End of issue. Or not.