The prices of several key food products and fuel have risen significantly in Armenia following the sharp depreciation of the national currency, the dram, RFE/RL reports.
The dram’s sudden drop immediately pushed up the retail prices of petrol and mainly imported foodstuffs such as cooking oil, sugar, butter and rice. In some grocery stores in Yerevan food prices were up by over 20 percent.
The exchange rate fluctuation also affected the prices of cigarettes and medicines. Some drug stores in Yerevan remain closed on Wednesday while others opened with new price tags.
The price rises were downplayed by Armenia’s State Commission on Protection of Economic Competition (SCPEC). Its chairman, Ashot Shahnazarian, said the regulatory body has inspected shops in central Yerevan and found that the cost of some food products rose by up to 12 percent.
Although the price of bread has risen by up to 50 drams in some shops in Yerevan Shahnazarian claimed no ‘instances of bread getting expensive” had been recorded by his commission and advised people to ‘look for bread in a shop where price for bread has not gone up’. The head of SCPEC also warned shopkeepers and suppliers against ‘unfounded price rises’, saying the commission will go after them.
Meanwhile, the head of “PolitEconomy” research institute Andranik Tevanyan has been asking “why where the state reserves wasted” if the CBA officials knew they’d let the dram’s rate loose so soon, saying the prosecutor should look into the waste of $31 million on Monday and over $360 million lost overall in attempts to control the AMD rate.
Observer,
1. Do you think Mr. Tevanyan is reading your blog? (wink). If so, he should give credit where credit is due. I love that he borrowed the word “waste” from my vocabulary. However, I suggest that he should be careful with other terms, such as “morons, clowns, circus, thieves, illiterate, etc.” 🙂
2. I am glad someone is raising the issue. Its not $360 million lost, its about $500 million since late December 2008 until March 3, 2009! And if someone audits the CBA books, it could be an additional $300 million from August 2008 (a total of $800 million in hard currency). Where is an audit of the CBA’s books from 2001 until 2009, by an independent, international, reputable agency?
3. Let’s call it what it is – grand theft of public property. There must be a parliamentary inquiry. And the Minister of Justice and/or the General Prosecutor should open a criminal inquiry. But don’t hold your breath.
David – nice post at the Armenian Economist (it’s you – isn’t it?) :))))
Observer,
I am not an economist! 🙂 Most economists are ignorant how the real world works, in general, and how the markets work, in particular. There are of course exceptions.
I just know a little bit about finance, economics and global markets (stocks, bonds, commodities, etc.).
In December 2008, I was asked about my opinion whether to keep the money in Dollars or Drams. After my analysis, I concluded that Dram was artificially overvalued and suggested to immediately switch to the USD. That was the correct call saving a lot of money. I just didn’t know how stupid (or wicked) the CBA, the PM and the President would be. But the CBA capitulated one month sooner that I estimated 2.5 months ago.
In short, the three stooges are merely common thieves. And I get upset when the highwaymen bankrupt an entire nation.
As stated before, in the near term, the USD was and still is the strongest currency. If I understand correctly, Armenians mostly keep their money in (a) Drams, (b) Dollars, (c) Euro, (d) Rubles.
I am bearish on the GPB in short, intermediate and long term. Ruble has been a disaster of late. Euro is an intriguing case, and requires a more complicated analysis.
Keep up the good work. Your post seems to be quite informative and lively.
Cheers.
Observer,
I just posted the following questions at the Armenian Economist blog. Apparently they have to be “officially approved,” before being “officially” posted. (Smile.) Meanwhile, I will leave your readers the same questions to help them get a more comprehensive view of the CBA’s recent monetary debacle. Let’s call it a crash course in Economics 201. The class is in session. The tuition is free. Students pay close attention.
2. Is there a legal requirement as to how much foreign currency reserve the CBA has to keep? If so, what is the statute or regulation? (Apparently no.)
3. What’s the mix of the foreign currencies (USD, EUR, JPY, RUBLE, etc.) at the CBA?
4. Does the CBA keep Treasury bonds? If so, what’s the percentage of the US Bonds, German Bonds, etc.?
5. What is the total amount of money supply in Armenia from the date of its establishment until today?
6. What was the real (not fudged, baked, cooked or grilled) GDP of Armenia from the date of its inception? (This one is a toughie, since the governments everywhere usually LIE about the GDP).
7. How much total deposits (in Dram) were kept in the Armenian banks on February 28, 2009?
Meanwhile, the free circus continues. The entrance fee is in “strong” Dram, with the CBA suggested retail price of 305. Who needs useless Dollars? After all the high banking priests know its real value. The ugly, fat and short monkeys with red behinds are in the ring – meymunutyun en anum. The gray parrots are on TV with “serious commentary.” The journalists are like deer in caught in the headlight. (Journalistic malpractice anyone?) The confused sheep are in the audience, unable to believe what’s going on. The security guards are nowhere to be found. The three stooges and their shameless and/or uninformed proxies are doing what they are good at – lying, lying, lying. You can either laugh or weep, your pick.
Interesting post on the dram devaluation by the excellent ‘The Armenian Economist’ blog http://armenianeconomist.blogspot.com/2009/03/pressure-on-dram.html
I just came from a store (SAS, more specifically), where I bought some yoghurt, sour cream, coke and a Russian magazine (GEO). All the prices were exactly the same, except the magazine, which was actually cheaper. But it’s true that gas prices are up.
Price update:
Went shopping again to a small local shop outside my building and here is what I found in terms of prices:
Bread: every kind except puri – unchanged (100AMD), puri – 180AMD instead of 170AMD.
Nutella – unchanged
Apples – unchanged
Toothpaste – unchanged.
The dollar went down from the high of almost 400 to 350-360. Some gas prices (not everywhere) also came down from the high levels recorded on Tuesday, though they remain higher than a week before – there is no denying that.
Thanx for the update V. Meanwhile Armenia’s state anti-trust body announced on Friday an investigation into the legality of consumer price increases resulting from the abrupt devaluation of the national currency, the dram.
http://www.azatutyun.am/armeniareport/report/en/2009/03/90B76C82-9D4A-49CF-B8E1-1BFEF640BEC9.ASP
The 100 AMD for bread referred only to small matnaqash. Sorry if i didn’t make it clear. In any case, the point is that none of bread prices in that particular shop changed, except the price for puri. My impression is that the Tuesday price hikes were more of a panic reaction. The prices will come down somewhat(and have already in many cases), maybe not exactly to pre-Tuesday levels, but they won’t stay as high as on Tuesday.