Saturday, November 29 2014 16:06
Economist: Armenian Dram needed a soft therapy rather than a harsh operation
ArmInfo. The Central Bank of Armenia (CBA) should have smoothly corrected the exchange rate of Armenian dram (AMD), Professor Ashot Tavadyan, Dr. Sci. Economics, Chair of Economic-Mathematical Methods at the Armenian State University of Economics, said at a press conference on Saturday, when commenting on the sudden devaluation of AMD against USD, which took place on November 24.
"The CBA should have prevented the sudden AMD devaluation against USD, because it is really dangerous and may cause a financial shock and create broad opportunities for speculative games, which are absolutely unacceptable", he said.
According to Tavadyan, correction in the exchange rate is a useful but long process the CBA should have launched two months ago. "Amid strengthening of the partner countries' currencies, in this case the Russian ruble, the correction of the national currency should have been done smoothly and softly and it should have taken longer rather than just a day. In that case, the country would not have to spend more from the currency reserves", he stressed. Prof. Tavadyan also recalled that over the past three weeks the CBA has undertaken currency interventions worth a total of $60 million, whereas throughout the year the Megaregulator has sold $200 million and bought $50 million, thereby spending USD 150 million on the AMD strengthening.
"On the whole, the AMD exchange rate needed a soft therapy rather than a harsh operation, because very often the remedy is worse that the disease", the expert said.
To note, earlier Armenak Darbinyan, a member of the Armenian Central Bank Council, said that the national currency rate correction bears no serious inflation risks. Neither does it threaten the financial stability, he added. He explained the national currency rate correction with external factors such as slackening of the economic growth and devaluation of the national currencies of the partner-states as well as commodity market trends in a range of countries. Darbinyan said the given step of the Central Bank enabled settling two problems: maintain the competitive ability of exports and ensure transfers to Armenia that usually intensify in the pre-New Year period. He added that the Central Bank keeps the situation under control and will do everything possible within its policy to prevent speculations in the market and maintain the financial stability.
To recall, the exchange rate of the US dollar to the Armenian dram increased by 16.6 points on 24 November versus 21 November (from 419.5 AMD/1 USD) to 435 AMD/1USD, refreshing the maximum rate of the last eight years.
By the latest data of the Central Bank, Armenia's gross international reserves for late Q3 2014 totaled $1.663 bln drams with a 6.7% decline for the quarter.
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