Central Bank Chief Admits Dollar Shortages In Armenia
By Ruzanna Stepanian

Armenialiberty.org
Friday 16, June 2006

The chairman of the Armenian Central Bank (CBA) acknowledged Friday
that buying U.S. dollars in Armenia is now considerably more difficult
than it was in the past, raising more questions about the official
reason for the dramatic strengthening of the dram.

The Armenian authorities maintain that the national currency has gained
more than 30 percent in value against the dollar since December 2003
because of robust economic growth and increased cash remittances from
Armenians working abroad.

However, the official theory about Armenia being awash with dollars
seems at odds with the fact that many local currency retailers now
routinely refuse to sell dollars to individual buyers, citing a lack
of the U.S. currency in their coffers. The shortages again came to
light with the dram’s renewed surge against the greenback which began
a month ago.

Tigran Sarkisian, the under-fire CBA chief, blamed the bizarre
phenomenon on currency traders. "We are now carrying out inspections
at currency exchange offices and are finding widespread violations,"
he told RFE/RL. "The problem raised by you does exist, and that problem
is created by currency exchange offices. We will try to sort it out
in the course of this year."

"They are catering for the shadow economy, which is illegal," Sarkisian
said without elaborating.

The CBA has already controversially shut down many exchange offices
in Yerevan in the last two years. Sarkisian would not say why buying
dollars was not a problem even before the stabilization of the
macroeconomic situation in Armenia in the mid-1990s.

Opposition politicians and other government critics, who dismiss
the official theory, claim that the Armenian authorities themselves
buy "cheap" dollars and thereby siphon off a considerable part of
hundreds of millions of dollars in cash sent home by migrant workers
each year. Hundreds of thousands of Armenians rely on those transfers
to make a living.

Large-scale importers of fuel, wheat and other key commodities, all
of them closely connected with the government, are seen as the prime
beneficiaries of the stronger dram. Conversely, many Armenian exporters
have been hit hard by the increased cost of their products. Some of
them, including Armenia’s main tobacco manufacturer, have threatened
to move their production operations abroad if the dram appreciation
continues.

Sarkisian made it clear that he is untroubled by possible job
losses. "Those enterprises that are not competitive must either close
or file for bankruptcy or move to territories where they can operate,"
he said. "We are creating an environment for competitive businesses."

"We always tell our entrepreneurs that in the conditions of economic
growth, exchange rates inevitably change and their salvation lies in
a growth in productivity," he added.

Official statistics show the volume of Armenian exports falling by
nearly 8 percent to $253.7 million in the first four months of this
year. Net imports, by contrast, rose by 13 percent to $584 million
during the same period.