Economist: “Psychologically sensitive” barrier of 500 AMD per $1 no reason to worry

The Armenian currency may further depreciate against the dollar as imports increase in the country, economist Vardan Bostanjyan told media on Wednesday.

“In general, imports indicate that we do not consume what we produce. This is not a positive trend for any country,” he said.

However, Bostanjyan added that we should not get worried about the possibility of the dollar exchange rate exceeding the “psychological” threshold of 500 drams.

At present, most exchange offices in Yerevan buy and sell U.S. dollars at 493-498 AMD.

“We need to ensure smooth transition, to avoid shocks in the economy. The risk is that the sharp devaluation of the dram may cause great strain, which is something to be avoided,” he said.

The economist believes that fluctuations of currencies are not only driven by money banknotes, but also the economy of the country. According to him, the Armenian economy is not in a desired condition and the Armenian currency may be subject to different fluctuations. Dependence on private remittances also has an effect on the economy.

However, Bostanjyan believes that the monetary authorities do their utmost to prevent price pressures.

“In case of a sharp appreciation, inflation will be recorded, and vulnerable parts of the society will get in a severe social condition. As a specialist, I am convinced that Armenian banks are doing everything possible to restrain price pressures in Armenia. Otherwise, the dollar exchange rate would have already crossed the border of 500 drams,” he concluded.

After a period of relative stability Armenia’s national currency is again showing signs of depreciation as for the first time in more than a year the Central Bank has been setting the dram’s official exchange rate at above 490 per $1.

The period of the dram’s high volatility in December 2014, when it lost about 20 percent of its value within just several days, was followed by more than a year of relative stability against the background of falling national currencies in other former Soviet countries.

The biggest plunge has been taken by the currencies of Russia, Azerbaijan and Kazakhstan, all of which are major oil exporting nations.

Armenia, which has no fossil fuel reserves, showed the least rate of currency depreciation during 2015 – at only 1.8 percent.