The state budget of 2009 plans a rate of 302.4 AMD per USD. It means the government forecasts that next year the USD rate will remain almost unchanged next year. It is mildly said quite doubtful despite the fact that our CB has a great experience of managing “floating” currency.
Before speaking about the possibility the currency rate of 2009 let us try to remember the changes it went through this year and last year. In January 1, 2007 1 USD was worth 363.5 AMD, which gradually slumped during the whole year (it means the USD was revaluated just like in past years). As of December 31 the USD lowered to 304.2 AMD. At the beginning of 2008 the USD-AMD rate became fluctuant and like the bankers say it started to show instable behavior. During the first quarter of the current year compared to the last 4 years it was the first time that motives of AMD devaluation were noticed. Of course, it was connected with the presidential elections and post-election aftermath. There were rumors about the outflow of great amount currency from the country. During the second quarter the instable behavior of the currency started to continue despite the fact that in general the AMD was even more revaluated. And during the third quarter of the current year the instable behavior of the currency was even more enhanced perhaps because of the international crisis. Starting from October 1 till 14 of October the USD gradually got revalued by reaching from the rate of 301.9 till 307.11 per USD. During the second half of the month the fluctuation was even higher. Especially it is now very hard to predict whether the 302.4 rate defined by the budget can be realistic for 2009. We can only try to imagine the fluctuation that may be expected in the mentioned year. We can conditionally define three factors. According to the first one the growth of the importation and exportation rates are tremendous. It is known that if we exclude the other factors we will understand that the more the country imports and the less it exports the more should the national monetary unit devaluate. This simple scheme shows that the AMD should have devaluated in the conditions of intensive importation and low exportation. Thus, if in January-September 2007 we exported 830 million USD goods and imported 2.2 billion USD goods it means that 2.2 billion USD exited Armenia and less than 830 million USD entered Armenia. Therefore the USD should have revaluated. However, as it didn’t take place we may at least theoretically assume that the influence of factors was higher. However, in practice the influence of the factor of importation-exportation couldn’t be so high. In particular the same thing happened in 2008. In January-September of 2008 our exportation in the USD didn’t increase at all and importation reached 3.1 billion USD from 2.2 billion USD. It means the importation-exportation rate grew by 0.9 billion USD or by 41%. It means that the factor of exportation gradually grows. In 2009 the volume of importation will still be growing and the state of exportation in the current conditions of the economy will stay miserable. Therefore, it is not hard to assume that this factor will affect the devaluation of the AMD in 2009. However, as the past experience of the CB showed our government has a great experience in fighting the devaluation of the national monetary unit. It has a great talent of providing luxurious conditions for importers and negative ones for the exporters. The second factor that affects the revaluation of the AMD is the foreign remittances that flow to Armenia. According to the CB estimation the annual remittances transferred to Armenia are 1.5-2 billion USD. According to the CB this is the main factor, which caused the USD devaluation in 2004-2007. It means that the remittances were so high that the USD wasn’t able to withstand the pressure of the AMD in Armenia. In 2009 due to the international economic crisis it is assumed that the volume of remittances will be decreased because the incomes of the population of the countries, which abide the crisis, drastically reduced. And as our remittances are mainly arriving from Russia and USA (these countries suffered the crisis most), it is obvious that if not decreased the volume of remittances will not increase for sure in the next year. And the third factor depends on the policy, which the US Central Bank (Federal Reserve System {FRS}) will implement. Since the Iraq war it has conducted a so-called “cheap money” policy. Thus, it increased the circulation of the USD in the world. Usually our government and the CB stipulate the revaluation of the AMD with the devaluation of the USD worldwide in 2004-2007 because the USD fell in comparison to the Euro and other currencies as well. At present it is quite clear that this version is not quite true. As a result of the last economic crisis of course motive of saving the money and refusing to give away credits was noticed among the US banks and credit organizations. This of course affects the circulation rates of the USD. It means the USD gets less and thus the rates are increasing worldwide. However, the FRS in order to avoid possible fluctuation as a result of the crisis periodically decreases the rates of re-financing (recently reached 1% from 1.5%, which is an unprecedented index). This means that the US banks can take credits from the FRS with more privileges and thus offer more credits. However, as usual our government offers opposite world economic forecasts.