Something incredible happened during the summer while everyone was
enjoying their vacation. The dram, which is the Armenian form of
currency, went through so many ups and downs that had never happened
during the past five years. The “laundering” of the dram reached the
exchange rate of 575 drams and then started going downhill until it
reached 495 drams for one dollar. After a while, it reached the 500
mark which remains the same until today. This caused doubt in many
peoples’ minds and aroused many questions for all of us due to the fact
that it made a direct and indirect impact on us. The first question had
to do with finding out what caused the devaluation of the dollar.
As in all countries, as well as in Armenia, this question is directed
towards the people who stabilize the exchange rates in the country-the
Central Bank. The bank gave a direct answer. First of all, the
President of the Central Bank announced that $5,000,000 million dollars
is enough to cause a state of chaos in the exchange market. So, when
the exchange rate of the dollar continued to go down, it was officially
announced that the reason for that was because of the immediate rise in
money transfers in 2003 ($140,000,000 dollars), as well as the increase
of tourists in Armenia. The citizens familiar with laws of economy were
surprised to find out that it was possible to devaluate the exchange
rate by 6% in two days with $5,000,000 dollars-making it 520 drams. The
next announcement made by the President of the Central Bank was that
the bank was not involved in the whole politics of exchange rates and
that his main job was to maintain the level of increase and decrease in
exchange rates.
This was the official interpretation of it all. Now, let’s see how the
rise in prices of products affected the people. Generally, whenever the
dollar gets devaluated then the prices of imported products must go
down too. Judging from the fact that the import of products plays an
essential role in our country (let’s mention that our country imports
power-generating materials), then it was obvious that the prices of
fuel and diesel had to go down at the end of July. However, the prices
remained the same. Taking into consideration the announcement made by
the Central Bank concerning the rise in private money transfers, a
large number of people suffered because they lost the opportunity to
get 7,000 drams in exchange of every 100 dollar bill. There are many
people who are living on the money sent from abroad and 7,000 drams is
a lot of money for them. Basically, out of the 140,000 million money
transfers made due to the devaluation of the exchange rates, the people
receiving the money from outside lost a total of 980,000,000 drams.
This is how the people got affected.
Now let’s talk about how the companies and businessmen who export
products got affected. The high rate of the dram obviously increased
the price of products being exported. The high price in the foreign
market is a danger for staying out of competition. Let’s not forget to
mention that as of the time between January and August, we have
imported products worth $400,000,000 dollars more than we have
exported. Fixing the dram rate had a negative impact on exportation and
it can lead to the rise in the above mentioned amount.
So, the devaluation of the dollar hurt the majority of the population.
Now let’s talk about the people that benefited and continue benefiting
from this. First in line are the companies and businessmen who import
foreign products to Armenia. The imported products bought at a low
price were sold at the same price until the devaluation of the dollar.
This means that the difference which is a result of the devaluation
strictly remains a profit for importers. At the present, the
devaluation of the dollar is at 13% (from 575-500 dram). That
difference will be approximately $2.5 million dollars a month for
importing power-generating materials (Armenia imports an average of
30,000 tons of benzene a month). So, we pay more for benzene in
exchange for the benzene bought.
Obviously, the reader is interested in knowing how the vast amount of
dollars got accumulated and served as a reason for the devaluation. The
$400,000,000 dollars in foreign trade could not make a negative impact
on the rise in the dollar. Instead of that, the above mentioned dollar
has gone out of Armenia. The year 2003 was a good year for foreign
investments in Armenia (Linsie Foundation), however the dram was never
fixed in 2003. Perhaps we can make ties to the flow of 6,000,000,000
billion dollars of capital from Russia which made its way through the
reefs found in dram “laundering”. After all, it is possible that the
flow of one part of the capital has made it to Armenia without
supervision.
What must be done?
We must go with the verifications of the Central Bank, which is a major
state financial institution (this is for people who think that the
Central Bank plays a major role in the exchange market).
We should never believe that the dram will overcome it all (this is for the people who have many saving deposits)
Never get surprised to see miraculous things happening in Armenia every day (this is for all of us).
P.S. As I was writing this article, I suddenly remembered an episode
from the novel by Zh. Verni called “Mysterious Island”. I remembered
the part when the mine set by captain Neto explodes and then the
English frigate first rises and then fall into the depths of the sea.
Now the person reading this is probably wondering what this has to do
with the Armenian dram. There is no connection, just the fear that our
exchange market has suddenly risen before exploding.