CBA Chair: Combat on Shadow Economy – Increase Dram Circulation


YEREVAN, JULY 24. ARMINFO. The best way to combat shadowed economy in
Armenia is an increase in dram circulation, and strengthening of the
national currency observed during the recent days can become a crucial
point for solution to this important task of the country, Chairman of
the Armenian CB Tigran Sargsyan said in his interview to RFE/RL.

It is not a secret that shadowed economy turnover is considerable
enough in Armenia, and, it is mainly the spheres dealing with US
dollars in cash, Sargsyan said. According to estimations of the
Armenian Ministry for Finance and Economy, the share of shadowed
turnover in GDP is 30-35%.

The growth of dram circulation supposes an increase in the spheres of
economy dealing with national currency, AMD. Besides, the chief banker
of the country thinks that the public should overcome the
psychological barrier and keep their savings in the Armenian drams,
and not dollars.

Sargsyan said that the rates of AMD strengthening in the current month
necessitate adoption of a new currency legislation in order to toughen
the country demands to currency operations and to create more
favorable conditions for circulation of the Armenian dram.

The CB adheres a policy of the “floating rate,”which means that its
level is dictated by the market, Sargsyan reiterated. At the same
time, he pointed out that the CB cannot interfere and dictate the
market-participants the level of the exchange rate artificially. He
added, the CB is not committed to artificial strengthening of AMD or

He said that a sharp increase in the USD circulation during the last
two months in Armenia has led to speculations observed on the currency
market during the last two weeks. That is, some individuals occurred,
who tried to take advantage of the situation for their personal
benefit hereby making the CB to purchase US dollars from the
market. However, the CB kept a neural strategy. Otherwise, the
“cheap” dollars bought by these individuals would have been sold to
the CB on much higher rates in future. All the participants of the
market understood very quickly that the CB had no intention of
currency interventions which would result in further artifical
reduction of the USD exchange rate, and in this connection, they took
an expectant position. He said that after the sharp strengthening of
AMD in the current month by 7%, beginning from July 21 the exchage
rate began returning to its normal course, reaching 525-530 AMD/1USD

Tigran Sargsyan said that the major goal of the CB is security of
stable prices, which was not influenced by the sharp reduction of USD
during the last two weeks, as it lasted a short period of time.

He stated that the citizens having AMD incomes in the period of the
reduction of USD suffered no losses, and these people make up majority
in Armenia. Taking into account the prior task for today i.e. poverty
reduction, it is necessary to secure stable prices, first of all, and
not to allow a devaluation of AMD incomes of economic entities and the
country’s citizens, and not to solve the exchage rate’s fluctuation
problem. Simultanously, it is impossible to prevent losses of the
citizens who have AMD and USD incomes.

As regards the private transfers to Armenia, they increase year by
year. According to the CB’s estimations, money transfers to natural
persons only through the banking system increased 46% in the first
half of 2004, and 31% in the first quarter, and 55% in the second
quarter as compared with the same period of 2003. It testifies to an
increase in USD incomes of the population. This factor also
contributes to strengthening of AMD, as the citizens receiving
transfers in terms of USD from abroad, “pay tax” during conversion in
case of USD’s devaluation. It is, naturally, within the interests of
our country, aiming no artificial strengthening of USD positions and
contribution to development of U.S. economy, Sargsyan said.

From: Emil Lazarian | Ararat NewsPress