One of the main issues that currently concern the population is the USD revaluation. And the reason is not that everybody clearly understands the crazy situation in the stock market of Armenia but because the AMD devaluation creates inflation.
Judging from the bitter experience of the previous years, now everybody knows that once the AMD is starting to devaluate the price of bread, butter, natural oil, gasoline, sugar and other stapled goods is getting high. But we all know what actually is going on. Inside the republic the deficit of the currency is so evident that even at the expense of its own reserves the Central Bank cannot rectify the situation even through its immense interventions in the market. And the reason of the lack of the USD and the Euro in the country is connected with the reduction of monetary transfers and rapid slump of foreign investments. Due to these two factors currency deficit was created, which cause the AMD devaluation. There are also opinions that the current situation has very political rather than economic reasons. Considering the internal political tension and also the fear that it is not excluded that the scenario of the last year March 3 may be repeated (meaning the increase of the USD rate by over 15% within a day) the main businessmen are insuring their monetary means. According to certain information they have bought immense amount of currency and have moved it outside the country. Now we have a situation that the Central Bank won’t be able to fix regardless of its big wish. By tossing several million dollars in the market it is not possible to maintain the rate of the AMD. Vice versa this will even more complicate the situation as the last reserves will be gone. We have spoken to the former president of Converse Bank Smbat Nasibyan about the created situation in the country. “It is very difficult to make any predictions regarding the currency rates but I may say what the tendencies may be. In our country the gap between the exportation and importation is covered at the expense of currency inflows, which was deducted causing a deficit of currency means. This motive will be continuing. I knew that the AMD would devaluate starting from February but this was restrained due to interesting factors. By saying factors I mean the rapid reduction of monetary volumes and consumption rates,” says Nasibyan. As a response to the question whether he finds it possible that a similar situation of March 3 of the previous year may repeat Nasibyan said, “Last year on March 3 the Central Bank announced that it is transitioning to a policy of a floating currency rate. The interesting thing is that prior to this the Bank has never announced that it had been conducting a different policy. After this event the IMF posted information on the Internet, according to which Armenia appeared among the 25 poorest countries in the world after Tajikistan, Congo, Kenya, Burkina Faso and some other states. The publication also read that the country is facing a financial calamity and needs financial support. That is the time when they’d provided the 500 million USD worth of loan. Of course this wasn’t publicized for us. I feel pity that a similar thing may happen today and this is totally within the framework of feasibility. Of the current monetary policy of the Central Bank then I think that in the market a very big speculative wave is raised and the resistance to this process requires waste of resources. Under these circumstances it is very hard to say whether through the interventions of the Central Bank they are attempting to correct the situation. But one thing is clear for sure. The AMD rate is plummeting because our monetary inflows in the currency have decreased. Regardless of our resources we cannot go opposite the reality.” In the opinion of Mr. Nasibyan regardless of to what extent the government makes efforts to overcome the created situation a little depends on it. “In Armenia even the most talented steps of the government have 10-20% impact. The rest of 80% depends on foreign factors. We are not independent and depend a lot on foreign factors. However, there are certain steps that the government could have implemented. For example, in our country the tax pressure is quite high. In conditions of crisis other countries relieve the tax burden. In our country they have done the opposite. On the other hand we need to collect taxes to fill our budget. It means that a closed chain is formed within the government. Besides that in the event of crises such reforms are normally not undertaken. These reforms should have been made in 2005-2007 when large amount of money was flowing in the country and the AMD was revaluating. During that period we could have created certain reserves. If holes are opened on a ship during the storm it is necessary to close these holes instead of improving the state of the sails.” In the opinion of the economist all the macroeconomic indices are creating a situation when the devaluation of the AMD will be continuing. “Indeed the volumes of consumption have drastically decreased. People buy fewer clothes, expensive food, cars, etc. But the population consumes stapled goods no matter what. But even for that our money won’t be enough. This year is going to be very difficult. The 2-3% economic growth of January is not essential and will soon vanish. In the near three years there will be minor economic growth – 5%. I think that by the half of the year the USD rate will swing around minimum 450.”