Notes From Hairenik

Due to the strengthening of the dram as the dollar continues to depreciate, Armenian companies are having a hard time lately doing business. While exporters and manufacturers are losing money since they rely on the dollar to sell their products and have less and less dram to show for their profits by the day, importers are making countless amounts of money, according to a recent article published by The owner of two huge tobacco companies, Hrant Vartanian, has just yesterday announced that he would move his production facilities to Georgia and Russia if further appreciation of the dram continues.

Indeed the strengthening of the dram has become ridiculous. As I explained in a previous post, only six weeks ago one dollar would buy 445 dram. But a few nights ago I noticed that an exchange booth near the corner of Tumanian and Mashdots Streets was offering 407 dram for a buck. It doesn’t make sense that the rate has increased so much in such a short amount of time, which is why people have been criticizing the Central Bank of Armenia. Both oppositionists to the government and others who have brains suspect that the Central Bank has been purposely playing with the exchange rate in order to benefit big businessmen with close ties to the government. Recently an opposition leader claimed that Armenia has lost more than $460 million, although that number doesn’t seem to be substantiated.

The other day James McHugh, the representative of the International Monetary Fund in Armenia--which incidentally along with the World Bank backs the Central Bank--belittled allegations that the abnormal strengthening of the dram was artificial, stating that “You can tell someone that there is no aliens and that there is an absence of evidence of it, but people will still go on believing in it.” I don’t know who this guy thinks he is discounting the fact that people are losing money paranormally, but we’ll look past this absurd remark.

Many Armenian families rely on relatives working abroad, such as in the United States or Russia, to get by. Millions of dollars (or rather $1 billion according to the Central Bank, although there apparently doesn’t seem to be any proof to back that claim) have been transferred to Armenia during the last year. For certain the economy has been boosted, judging from the plethora of cars on the road and mushrooming construction projects throughout Yerevan’s center, not to mention the wall-to-wall carpeting of cafés. Things are definitely bustling, there is no mistaking that fact. But how does the dollar-dram exchange rate appreciate 35 dram during a six week period? During tourist season the dram’s value usually appreciates, nevertheless something smells funny. At the same time, prices for goods are inflating when the opposite should be true—a visit to the local grocery store will show that. It isn’t possible to be non-skeptical about this paradox. Nothing is adding up.

The increasing value of the dram should be embraced. Technically it’s beneficial for Armenia’s economy. Realistically, it’s detrimental. Strangely enough, on Thursday, the day after the IMF representative made his statement about aliens, the dollar-dram exchange rate was 418 dram. On Wednesday it was 410. And today, it is as high as 420. Go figure.