OBJECTIVE AND SUBJECTIVE CAUSES BEHIND EXCHANGE RATES FLUCTUATION

AZG Armenian Daily
22/06/2006

Devaluation of USD rate in Armenia is more conditioned by paradoxes,
than by economic laws. Tatoul Manaseryan, member of "Justice"
faction, said this at "Hayeli" club today. He said that in the
theory of economics there are 4 basic factors that may have impact
on consolidation of the national currency.

Firstly, this is the growth of economy, but in this case Armenia should
have at least 30% of the economic growth for devaluation. Secondly,
devaluation is caused by the fluctuation of the main world currencies,
which, in the case of Armenia, can’t have such a big impact,
either. The third factor is the state of the payment balance of
the country.

Manaseryan said that we have nothing to boast about, as the export
tempo experiences slowdown. He added that the payment balance
of Armenia is negative, and Armenia mostly exports USD (about
$3 billion). The fourth factor is a subjective one. Manaseryan
supposed that there are forces that get inside information and make
super profits, holding monopoly positions in the markets. Besides,
the super profits they get are connected to the shadow economy that
makes about 80%.

At the same time, MP representing the Republican Party of Armenia,
economist Gagik Melikyan said the euro-dollar fluctuation in the
international market is in conformity with the revaluation level
of the Armenian dram. Nevertheless, he believes that one should not
neglect the season factor used by certain financial organization who
speculate on sharp drop of the exchange rate. The last dollar sag
was connected with the "last phone call," Melikyan said. However, T.
Manaseryan disagreed with him. He called paradoxical that prices,
including for imported goods, are growing in the country despite
the strengthening of the Armenian dram. If it is connected with the
rate of US dollar, the rise of prices is tangible enough. He said
all this paradox is connected with the high black economy and its
monopolization.

Nevertheless, G. Melikyan said, one should not neglect either the
high economic growth or the US policy on devaluation of the US
dollar or the large-scale private transfers to Armenia. In such
conditions, the Central Bank can maintain the foreign exchange rate
only through dram interventions into the market, which will lead to
inflation. T. Manaseryan does not see any way out of the situation
though intervention into the market either. The only way out is to
peg the Armenian dram to the "basket of world prices" for key products
in order not to depend on the dollar or euro, he said.

This way is successfully applied in a number of states. He underlined
a circumstance that Armenia still lacks an exact program of economic
development, its structures, priorities. However, his political rival
disagreed with him again.