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What about Armenian dram?

25 August 2015 [13:00] - TODAY.AZ

By Sara Rajabova - AzerNews 

Economists and experts are wondering how the weak Armenian dram manages to remain stable as the currencies of countries with strong economies are sliding.

This issue raises eyebrows especially after the recent collapse of the Russian ruble, which has had an undeniable impact on the Russia-dependent economies, including Armenia.

Experts say the crisis in Russia has just begun and thus the fall of the ruble will continue, which would consequently create a new economic burden for impoverished Armenia.

However, despite this fact, the Armenian dram continues to hold steady while the ruble has experienced yet another drop, and the Kazakh tenge and the Chinese yuan have devaluated.

Initially, there were thoughts about some ‘specially-designed’ financial strategy in Armenia.

However, upon deeper analysis, the truth reveals itself. The main explanation for the dram’s stability is that the Armenian economy itself is at standstill. If it were to experience any movement, the national currency would collapse immediately and would be unlikely to ever recover its position.

The devaluation of the ruble last year has caused a sharp jump in prices. Nevertheless, dram lost only 17 percent of its value in this period, fell gradually, and has since remained stable.

The government even makes statements on strengthening the dram from time to time.

However, such "strengthening" measures do not have any positive effect on the Armenian economy. On the contrary, it has created even more problems for local producers.

The Armenian media reported that last year that Armenian businessmen asked authorities to liberalize the dram. The fact remains that as a result of the depreciation of the ruble, Armenian goods are no longer competitive.

The economists said this “stable” situation of the Armenian dram will not remain too long.

Vilen Khachatryan, an economic expert, told Armenian media that the Armenian dram may drop against the dollar by up to 15-16 percent.

The upward trend of the greenback against other currencies will last, he added.

“The looming currency tumble may be mitigated by inbound dollar flows to the country in the coming months, so their sufficient levels are essential. Another fundamental is the policy response of the Central Bank, which may or may not choose to contain currency drop by means of its foreign reserves. But one can expect the dram to depreciate by anywhere between 40 and 80 per dollar (16-17 percent),” Khachatryan said.

Meanwhile, Bloomberg included the Armenian dram to the list of candidates for devaluation, placing it fourth in the risk group.

The Armenian currency has lost 15 percent of the value last year and this process is likely to continue, according to Bloomberg. Experts did not predict exactly how much the dram could fall, but talk about a guaranteed fall of Armenia’s national currency.

Armenian entrepreneurs are now calling on the government to liberalize the dram when there is little, if any chance to take mitigating measures.

However, despite the hardship caused by this situation for businessmen and people, the incompetent Armenian government has no will, and most importantly, no capability to improve the miserable economic situation that the country has found itself in.

URL: http://www.today.az/news/regions/143144.html

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