All what is happening in the market of foreign currency exchange can be called “déja-vu”. When we follow the processes it seems that we are having the same processes as in April. Specifically, this process looks pretty much like what was happening till March 2. Later, on March 3, the national currency “exploded”.
The difference is that if till March 1 the Central Bank was keeping the exchange rate stabile at 305 dram, now it is slowly and steadily growing. During one and half months the exchange rate of dollar grew by 15 dram and reached 385. There is difference in the policies of the CB leadership as well. If in the past the CB used to petition people to keep their savings in the national currency and assuring that it was safe, now the CB is keeping silence, which stimulates more chaos.
This chaos is the main and biggest common thing between the situation we have now and had before March 1. People were waiting for the national currency devaluation, which happened spontaneously on March 3. The trade banks and their behavior don’t help the situation either. For example, most of the trade banks are providing consumer credits in foreign currency. As a result, people think that the banks are insuring themselves from risks and national currency devaluation, which is a justified opinion.
The CB’s policy of intervention and selling huge capacities of dollar even worsens the situation. For example, in the period of September 14-18 the Central Bank sold 17.8 million dollar in the stock exchange market, and in the period of September 22-25 it sold 18.59 million. It turns out that during 11 days the CB sold 36.4 million dollars, which is a huge capacity of the Armenian market. The CB has done this in order to escape from drastic changes in the currency exchange rates. Meanwhile the price of dollar was raised by 10 dram in the same period.
As it is happening in a very transparent condition, mass media is free to cover these changes. It is also natural that only the print media is discussing this issue because the electronic media is full of optimistic coverage. As for the government, they are blaming the print media of generating panic. Certainly journalists cannot influence on the policies of the Central Bank and trade banks directly, but they can influence on the financial market. Simply said, newspapers refer to certain information and write that the national currency is devaluating, the readers get the newspapers, read these articles and exchange their savings. Meanwhile they inform their friends and relatives about it too. Thus, these rumors are increasing the number of people who want to exchange their money; accordingly the demand to dollar is increasing as well. The trade banks have to raise their demand in the foreign currency as well, as a result of which the CB has to sell dollar in order to keep the situation stabile. If the CB does not sell foreign currency, this process will deepen and result in financial fiasco. It turns out that newspapers are generating tension, and the CB has to take new steps resulting in critics again.
One may argue that it is true, but if several newspapers with several thousand copies of papers can destabilize the financial situation in case when the government controls all the powerful TV companies, it means that something is wrong and the situation is more than just being dangerous. It means that the newspapers have more influence on the currency exchange market than the TV companies, Central Bank and the administration all taken together. Thus, it means that the Central Bank is not competent. However this is not the case and the problem is deeper. In reality there is no serious reason of the national currency devaluation. The exchange rate as a result of March 3 seemed to correspond with the situation of the financial market and hardly would it be logical to expect drastic changes. Of course the capacities of export and foreign money transfers to Armenia have reduced as well, thus the capacity of the foreign currency inflow into Armenia has been cut down as well. On the other hand, the import has been cut down too, thus less foreign currency is being exported. We should also bear in mind that we have borrowed more than one billion dollar credit. Of course the relation between the foreign currency inflow and outflow to/from the country is not good for the economy of the country, but it is not very dangerous or tragic to the extent of being too much dangerous to say that national currency may explode.
Only panic can result in such explosion of the national currency. The ones that are guilty in the panic are not the CB, its staff, banks, nor the newspapers. The problem is that the society is totally unconfident to the governmental system and the government’s policy, which concerns the Central Bank as well. In such conditions of mistrust one can’t convince the citizens to believe in the “real” Armenian dram, even more the Armenian virtual world. In order to do this they need much more rather than TV advertisements with milk bottles painted in the three colors of the national flag.
P.S. When this publication was ready, the CB published an announcement concerning the transactions in the stock exchange. According to this information, yesterday in the NASDAQ OEMEX ARMENIA JSC transaction of 6,650k USD was implemented at the rate of 385.58 dram for one dollar. The closing exchange rate was 385.58. In other words, this is what I was trying to prove.