During the past week US dollar was depreciated by 35-40 dram per dollar, however later the exchange rate went up by 25-30 dram per dollar, but it did not reach the level it had before such depreciation. Currently one dollar exchange rate offered by currency exchange points in Yerevan is about 296-300.
According to the information of the press, last week a great amount of dollar was sold in the stock market of Armenia. This amount exceeded $20 million. At the same time, the median price of one dollar was 312 dram and 90 luma, and the closing price was 312 dram and 50 luma. During the same period, the exchange rate offered by currency exchange points was 275-300. Analysts say that such big difference among separate exchange points can only be a result of financial speculations. Generally, many people say that the price of dollar is falling due to continuous financial speculations. The exchange rate of US dollar has depreciated by 50% since 2003. Analysts say that this is a specific “informal tax” implied by the authorities on the money transfers coming to Armenia from abroad. This “hidden tax” is too big in our country – 50%. No tax collection established by the Armenian law is so big. The biggest tax of Armenia is VAT, which makes 20%. Thus, as during the TV marathon Armenian businessman with Karabakhi origin, Levon Hayrapetyan, residing in Moscow said, Armenians are paying a genetic tax. This tax started from a low percentage and has become 50% during 3-4 years. Furthermore, it still tends to growing.
The depreciation of USD mostly affects the citizens, who receive financial support from their relatives overseas. In 2003 they could exchange $100 at 58.000 dram, but now this amount is 30.000. The domestic producers suffer too since they sell their products in abroad and get dollar, but in their country they spend the local currency to cover the production current expenses. Exporters are complaining that due to this depreciation the price of their product in the foreign market is growing, thus their product is losing its competitiveness in foreign markets.
Concerning this crisis the chief accountant of “Yerevan champagne and wine factory”, Hovhannes Iskanjyan said, “If this process continues we may not export any more”. The factory exports champagne and wine to Russia. They convert the profit they receive from their products into drams and pay the current expenses and salaries. Since last year the company has decreased the capacity of its production and export by 30-40%. Karen Stepanyan, the head of the commercial department of “Armenmotor” company, which produces meat grinders, says that the company shall export 1000 meat grinders to Russia in 2008, which will be sold during three months. As the exchange rate is falling and tends to falling in the future too, the company worries that the net price of their product expressed in Russian rubles or dollar may go up, thus the company will have to also increase the price offered by it in the market. This means that this product, which is produced in Armenia, will not be compatible in the Russian market any more. This company has been faced with such situation in the past too, since it used to export its products to the US too.
“As a result of dollar depreciation we had to increase the price of our product and thus we lost our market consisting of 700 thousand consumers,” says the head of “Tosp” company, Suren Bekirski, “Our Russian counterpart worries about the same problem too. If we could find at least credit at lower interest rates or compensate the expensive transportation fees, we would not suffer so much.”
Concerning such complaints the RA authorities dealing with the issue, namely the CB head Tigran Sargsyan, say that instead of complaining the producers should increase the productivity. “It is foolish,” says the director of Synopsis company, which is involved in IT field, “The productivity of our company is higher by ten times than the others, but we still have losses. It is absurd, demagogy. Armenia is already considered a risk zone for Synopsis. Today the only risk factor in Armenia for our company is the currency exchange rate. The government, taxation and customs bodies don’t create any obstacles for us. Notwithstanding, there are some legal acts, which are supporting our development. As for the existing situation, our investors are investing money not to develop, but at least to keep the status quo. IT is considered one of the priority development fields of the economy, but due to this currency depreciation it suffers much. I don’t want to say that this production will be closed, the foreign investors will go from here, but the interests of investors are not protected in Armenia, they are ignored. Thus, good businessmen in Armenia are those who import. The economy, which is based on importing only, is not a good economy”.
Another priority field of development, which is diamond production, has lost over 60% due to currency depreciation. One of the biggest diamond production companies, “Shoghakn”, has lost so much that it may terminate its existence. In summer this company did not work, and in September it started producing with small capacities. However, it is not excluded that the company may terminate its existence generally till the end of this year or in 2008. “In summer the dollar exchange rate was 340 and I presented a new business plan to the owners and persuaded them not to close the factory,” says the director of “Shoghakn”, Sergey Gasparyan, “Now we have only 300 employees. I was planning to hire more employees, but all what happened during these days changed my plans. Now I don’t know what I shall do. How can I persuade the owner of the company, Lev Leviev, not to close the company? In the past we made work plans for 1-2 years, but now we can’t make such plan even for one week since dollar is falling every day. In the world diamond is processed in countries with cheap labor. As a result of dollar depreciation the labor expressed in dollar has increased too much in Armenia”.
P.S. Recently Bagrat Asatryan, former head of the central bank, commented on dollar depreciation in his interview given to A1+. “If we treat the issue from private point of view, we can be proud of the national currency, but if we discuss the issue in complex, we will see that it is very dangerous,” B. Asatryan said, “The growth of the national currency rate should be treated in the context of the overall economy. Not everything can be a reason to increase the dram exchange rate. If we could compare the growth of dram to the prices of potato, bread and other products, it would be great, but we are in a situation when as a result of such currency exchange rate changes potato, expressed in dollar, is cheaper in the United States than in Armenia”.