THE EXCHANGE RATE AND ELECTION 2007

Lragir.am
19 May 06

Fluctuations on the currency exchange market of Armenia are not
related with any external factor. Economist Edward Aghajanov thus
assessed the recent revaluation of the Armenian dram on May 19.

According to him, it is pointless to explain the tendencies on the
Armenian currency market using an economic logic.

“If some of our oligarchs have problems with say the budget, they need
drams, they cause the exchange rate of the dram go down, collect the
drams and solve their problems. And do not forget that next year is an
election year, much money is needed. You know that the oligarchs are
likely to run for the parliament very actively. And most probably our
oligarch guys have already started saving money to spend it lavishly
in 2007,” says Edward Aghajanov. He says some people estimate that
at least half a million dollars is going to be spent for each seat
in parliament.

“See how many of our oligarchs are already opening offices, it
takes money, doesn’t it?” says the economist. According to him,
this illogical situation benefits from the policy of the Central
Bank on revaluation of the dram. Edward Aghajanov believes that this
policy is wrong and leads to a perilous situation. Edward Aghajanov
says the revaluation of the Armenian dram against the dollar caused
the adverse balance of trade of Armenia to go up by 28 percent in
2005. The economist forecasts that it will soar by another 22 percent
in 2006 and will go far beyond 1 billion dollars. The adverse balance
of trade in Armenia is equal to 17 percent of the GDP, whereas when
the adverse balance of trade in the United States topped 5 percent
of the GDP, the economists of this country set the alarm go.

“And what did the Americans do? They artificially caused the exchange
rate to go down. Thanks to this low exchange rate in November
2005 exports in the U.S. exceeded a monthly index of 100 billion
dollars.” Edward Aghajanov is surprised why the Central Bank and the
government are not concerned about the tremendously high percentage
of the adverse balance of trade and the tendency to grow.

From: Emil Lazarian | Ararat NewsPress