The Armenian authorities will stabilize the exchange rate of the national currency, the dram, and prevent a surge in consumer prices, Prime Minister Hovik Abrahamian said on Wednesday, echoing statements by the Central Bank.
Abrahamian blamed the worsening economic situation in Russia on recent weeks’ sizable depreciation of the Armenian dram. “There is no problem. The Central Bank keeps the situation under control and I think that things will be sorted out in the next few days,” he told reporters.
The dram has weakened by more than 6 percent against the U.S. dollar since mid-November amid falling cash inflows from Armenians working in Russia. The Russian ruble has depreciated even more sharply in the same period, owing to a steady decrease in international oil prices and the impact of Western economic sanctions.
After the dram lost 1.7 percent of its value on Tuesday the Central Bank insisted that it has sufficient hard currency reserves to prevent further exchange rate fluctuations. The exchange rate was virtually unchanged on Wednesday.
Abrahamian insisted that the weaker dram will not push up consumer price inflation in Armenia. “Inflation is within a 5 percent range, which I consider normal,” he said.
Deputy Prime Minister Vache Gabrielian likewise told the Armenian parliament earlier in the day that the authorities will keep the annual inflation rate within their target band of 4 percent (±1.5 percentage points) set for 2014.He said average inflation stood at just 1.5 percent as of last month.
Both Abrahamian and Gabrielian also said that state anti-trust regulators would act quickly to sanction businesses trying to capitalize on the exchange rate instability with “undue” prices hikes.
The unpredictable rate fluctuations have already affected some import-oriented Armenian companies. “I have not sold goods from my warehouses for the past few days,” said Raffi Mkhjian, the owner of Raffaele Contini Trading Company, which imports and processes coffee. “No business that imports raw materials and other goods can avoid losses in this situation,” he told RFE/RL’s Armenian service (Azatutyun.am).
Samvel Avetisian, the manager of the Kia Motors Armenia car dealership, also complained about the uncertainty in the currency market. “There is one exchange rate in the morning and another in the evening,” he said. “And the Central Bank and currency exchange shops set different rates. We now have trouble calculating a [dram-denominated] price of our cars.”