Armenia`s exchange market oversupplied with US dollars - expert 

ArmInfo. A number of external and internal factors account for the US dollar depreciation in Armenia, economist Suren Parsyan said in an interview with ArmInfo. 

One of the external factors is the USA's policy of depreciating the  national currency and increasing the funding of foreign aid. Cheap  money has facilitated the exports of goods and services from the USA.  The USA considerably increased exports in the first quarter of this  year as compared with last year. According to Mr Parsyan, the USA has  considerably increase oil and gas exports at relatively low prices.  This policy caused "dollar inflation" on international markets, which  has been observed in Armenia as well.  Considerable amounts of U.S.  dollars have been supplied to Armenia as part of the U.S.  international aid, which has caused AMD appreciation. 

As regards the internal factors, the expert singled out the  refinancing rate the Central Bank of Armenia (CBA) has left  unchanged, 9.25%. Pursuing the tight money policy, the CBA is seeking  to keep inflation down. Inflation would have reach 15% to 16% if the  AMD/USD exchange rate had remained AMD 500/$1.  "By appreciating the  national currency, the Government and the CBA are seeking to prevent  such a situation," Mr Parsyan said. Increased inflow of transfers  largely contributed AMD appreciation as well.  This April alone,  transfers to Armenia totaled $350mln, mostly from Russia. Visitors  from Russia, Ukraine and Belarus have also brought foreign currency  to Armenia. 

Mr Parsyan points outs lower interest in the US dollar on Armenia's  domestic market. Last year, Armenia paid for oil and gas supplies in  USD terms, whereas it is doing so in RUB terms now. Gazprom Armenia  is purchasing Russian rubles in Armenia's domestic market to pay for  gas. This results in a decline in demand for the USD in Armenia,  which is a cause of an oversupply. 

"The Central Bank could have influenced the market by withdrawing the  excessive US dollars from the market or by reducing the refinancing  rate. However, it is not doing so as it intends to meet the inflation  target in the medium term. However, it is clear the regulator will  hardly be able to maintain the rate for a long period, as reduced or  ceased inflow of people from other countries will inevitably cause  AMD depreciation," the expert said. He points out Armenian exporters  are sustaining substantial losses now and have to raise their prices  to ensure profits. 

The current market situation will affect travel agencies as well, as  they sign contracts with foreign companies in USD terms whereas they  pay salaries to their staff in AMD. So the managers have to pay 15%  of the salaries out of their pocket. 

The companies holding monopolies on imports are the ones benefiting  by setting souring prices and getting super-profits. According to Mr  Parsyan, the Commission for Protection of Economic Competition should  consider the issue to protect the population, especially the  low-income people who can hardly afford such staple foods as flour,  vegetable oil, and so on.

"Prices keep on rising and people have to pay," he said.