The appreciation of the Armenian national currency against the US dollar and other major foreign currencies since the beginning of December, according to analysts, is having a negative effect on the population depending on remittances and having main income sources calculated in dollars, while adding additional advantages to importers. Paradoxically, it is admittedly the result of a Catch 22 situation when the Holiday Season rush makes people exchange more, for less, as families stock for the long New Year celebration.

Some economists, however, say such factors as Central Bank inaction and control of the market by lucrative importing monopolies only make this situation worse in Armenian reality.

On December 1, 2009, one US dollar, according to the exchange rate set by the Central Bank, sold at 385 drams, and on Monday (December 21) it dropped to as low as 375 drams per US dollar. In recent days, commercial banks in Armenia are buying the dollar at a low price, paying 371-372 drams per one dollar.

Such a fluctuation is the sharpest since the devaluation of the national currency by some 25 percent on March 3, 2009 when the Central Bank let the dram free-float after keeping it in check for months.

The fluctuation is most felt by those receiving dollars from family abroad. And, typical of the Armenian mentality, fingers first point at the state accusing authorities of wrongdoing.

For 10 years, Silva Aghasyan’s husband has worked as a laborer in the United States and regularly wired money back home. Because of the lower exchange rate ahead of the holiday season Aghasyan, a 56-year-old resident of Echmiadzin, has lost up to 4,500 drams (or $12 according to the current exchange rate) by exchanging $300.

“Some five years ago 100 dollars could buy up to 60,000 drams, now it is only 37,000. Our state shares the earnings of people who left their homes for migrant jobs abroad. I can’t understand to whose pocket this money goes,” says Aghasyan.

“It is good that I live with my son, we can make both ends meet somehow. But what about the families whose relatives sent $100 or $200 so that they can cover their holiday expenses? How can the state take that money from them?”

While economists mostly consider it natural that the dollar exchange rate should change ahead of the New Year in Armenia (where most people are known to spend lavishly ahead of the year’s biggest holiday, for which purpose they use their currency ‘reserves’), but they also mention other factors that contribute to this situation.

Financier and chairman of the Central Bank of Armenia in the 1990s Bagrat Asatryan says that the decline in the dollar exchange rate is the result of the Central Bank’s policy of regularly buying up drams to prevent the dollar’s appreciation.

“Dollar interventions lead to a relative reduction of dram masses and objective prerequisites are formed for the appreciation of the dram,” he says.

According to Asatryan, this first of all has a negative effect on ordinary citizens.

“A citizen who should exchange his 100 dollars before he or she buys something, is confronted with a fact. Prices continue to rise, prices for imported goods in Armenia have never decreased in conditions of an appreciating dram and won’t go down now either, since everything is decided by monopolies. And this time, too, they have decided to make money at the expense of everyone who, having tightened their belts, has hoped at least to have some good table for the New Year.”

According to economist Andranik Tevanyan, director of the Politeconomia research institute, developments contrary to international financial tendencies are taking place in Armenia: “While the dollar has become stronger on the international market, here in Armenia it has grown weaker.

“When the dollar was on the rise, the Central Bank would introduce dollars on the market, and now when also for some objective reasons the dollar is on the decline, the Central Bank for some unclear reasons does not intervene, even though this intervention was necessary to avoid sharp fluctuations,” says Tevanyan.

Central Bank press secretary Zaruhi Barseghyan does not agree with Tevanyan. “There is no need to create additional tension, everything is normal. We continue to smooth out all sharp fluctuations as we have always done.”

But Tevanyan believes that the problem is in political responsibility: “As long as no one bears responsibility for the developments that have taken place on the financial market for years, all this will continue and ordinary citizens will bear the consequences.”