WHY IS THE DRAM RISING BACK?

16:20:16 – 25/03/2010
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Why after a sharp devaluation did the Armenian Dram start rising? The
former Prime Minister Hrant Bagratyan told reporters today that AMD
does not devaluate as a result of speculation, as the government
explains it. The real cause is that major business-owners, the
oligarchs, are sending their capital outside Armenia, and the balance
of trade is negative.

As to the prompt revaluation following a sharp devaluation, Hrant
Bagratyan says the government has suspended transfer of major sums
abroad, by both physical and legal persons. According to Hrant
Bagratyan, the government’s next step which brought about the
revaluation of the dram is that the Central Bank decreased the 5th
normative for commercial banks, which is called `currency position’.
There is a short position, and there is a long one. The indices were
lowered to enable the banks to sell the currency. If a commercial bank
accepts deposits in dollars, the reservation must also be done in
dollars. These reservations are reduced by several percentage points,
forcing banks to sell the currency. This is done to control the
exchange rate low. I think these steps are dangerous for the banking
system’, says Hrant Bagratyan.

He means the damage to the banks.

As to the exchange rate of the dram, Hrant Bagratyan thinks the
government may increase the external debts and to keep the rate for
some time but it will tend to drop over the year.