True, the dollar rate used to go down by 5-6 drams from time to time, but there was no sharp tendency. In fact, we don’t really pay attention to the 5-6 dram tendency because in a year and a half (from the beginning of 2004 to the first half of 2005) we “lost” 140 drams in every dollar. But the recent drop in the dollar was 10 drams. Just yesterday one dollar was 435 drams at all exchange rate points. Workers and customers were saying that the exchange rate would go down to 420 drams. In other words, the same amount that the Central Bank had calculated.
The Central Bank gave the following explanation of the evaluation of the dollar for the dram:
“It’s due to the influence of the market.”
“In the given time period, the dollars sold to the banks exceeded that of the actual cost. Based on our evaluation, this can be explained by the large amounts of export during the second trimester and the exchange of the drams from the exports,” as stated in the Central Bank announcement.
It is worth mentioning that 184.4 million dollars worth of products have been exported during the first trimester of 2006. This number has gone down by 5.6% if we compare with the same period in 2005. But whereas exports have increased during the second trimester of 2006 compared to the first trimester and have led to the demand and high evaluation of the dram, then, if we think logically, why didn’t the dram devaluate in the beginning of the year? After all, exports had gone down and as a result the demand for the dram had to go down. Of course, each citizen of Armenia knows that Armenia’s economy doesn’t follow market laws. Our state officials always find some absurd explanation no matter if that explanation is close the real thing or even logical. Let’s recall that the value of the dram sharply went up last August and made it up to 480-490 drams. Head of the Central Bank Tigran Sargsyan said that the reason for that was that at the time, the Chinese Yuan had been devaluated by 2%. Currently, the Chinese Yuan has been going up, but in contrast to that, our dram is being evaluated. So, we have to go deeper to find the reasons for the devaluation of the dollar.
As we stated, the Central Bank believes that exports have gone up during the second trimester of 2006, compared to the first. This evaluation has been given by the National Statistics Service, which hasn’t even published the data for the second trimester. The service is going to do that only in June or August. In fact, the National Statistics Service administration hasn’t even calculated the number of exports for the month of April of the second trimester. So, how did the Central Bank suddenly state that exports have gone up? How much did it actually go up to make the dollar rate go up? Only the Central Bank has the answers to these questions. Besides that, molybdenum, copper, the imported and reprocessed diamonds and reprocessed nutritional products are the main products exported from Armenia. First of all, the copper and the molybdenum are extracted and exported. The companies doing that are our top authorities, although they are legally considered foreign companies. True, the prices for these metals have gone up internationally, but that doesn’t help Armenia’s economic development because the money goes to the owners. As for the taxes, in particular the Zangezur copper/molybdenum factory has paid fewer taxes during the first trimester of this year compared to the same period last year. So, this field has nothing do with the devaluation of the dollar. Diamond production levels are not that high. “Shoghak” is the leader in diamond extraction factories also paid fewer taxes in the first trimester of this year compared to 2005. In fact, due to less circulation of products during the past year, all diamond extraction factories fired some workers and lowered salaries. It turns out that this major exporting field couldn’t play a role on the devaluation of the dollar. Export of ready-made nutritional products couldn’t play an essential role because there are not many products. According to economists, this is yet another speculation that export is not going up.
“We are making the national dram go up and it doesn’t help production and export,” says economist Edward Aghajanov. “In 2003, Armenia’s foreign trade deficit was 591 million dollars, in 2004 that number went up to 636 million, while in 2005 we had an 818 million dollar foreign trade deficit, meaning that the trade deficit went up by 28% compared to 2004. This proves that the national dram doesn’t help export; on the contrary, it helps imports and hurts the producer. That’s why we had a 3% decline in industry in the first trimester and 5% decline in export. Based on my calculations, this kind of politics will make Armenia have a 1 billion dollar foreign trade deficit in 2006 for the first time ever.”
Let’s recall that the export deficit started to rise along with the devaluation of the dollar starting from 2004.
“The rate politics doesn’t develop on its own. It has to have some goal and must help develop national economy,” says E. Aghajanov. “This means that Armenian authorities work with the importers. It is known worldwide that the national exchange rate favors importers.”
We know our importers very well. We also know that the imports of large consuming products such as petroleum, gas, sugar, meat products, medicine, construction materials are monopolized and controlled by the authorities. This shows us once again that the evaluation of the dollar to the dram is a very clear speculation; it’s a way for importers and authorities to make large amounts of money. In fact, some people are of the opinion that, in this case, the devaluation of the dollar is not by chance. It is worth mentioning that two weeks ago, the “Armavia” airlines company belonging to Mikhail Baghdasarov lost two A-320 planes and is planning to buy or rent two new planes. The company needs money for that. M. Baghdasarov plays a large role in importing petroleum to Armenia. It’s already clear as to why the dollar rate had to go down and where the money taken by the “businessman” Baghdasarovs will go. Amongst all this, the most interesting is to hear the Central Bank’s explanations. The bank is talking about the rise in exports during the second trimester of the year when the trimester is not even over yet. Keeping an eye on the calendar is probably a bad tactic for the Central Bank.