14.Jun .2022 14:30

Artificial devaluation of dram may trigger new wave of inflation- central bank

Artificial devaluation of dram may trigger new wave of inflation- central bank
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Artificial devaluation of the Armenian dram by the Central Bank against USD and Euro may trigger a new wave of inflation, Central Bank Chairman Martin Galstyan said.

"If we artificially lower the value of our currency, and buy foreign currency, we will face another wave of inflation which will affect everyone," he warned, speaking in parliament.

Galstyan explained that in such situations, support should be provided to those industries which are competitive in the new situation. According to him, such support can be provided as part of a special government policy.

"On the other hand, we must understand that inflation brings additional tax revenues that could be used to address the problems that have arisen," he said.

Asked why prices are not properly adjusted at the current exchange rate (dollar to dram), the chairman of the Central Bank cited two factors.

"One is that at this stage, when the exchange rates went down, international commodity prices have risen sharply due to the situation in Ukraine. The second factor is transportation problems raised often by our exporters. For them, the primary problem is often not the exchange rate, but the long lines at the Upper Lars border crossing (on Georgian-Russian border) and the resulting rise in transportation costs," he stressed.

Earlier, Armenian Minister of Economy Vahan Kerobyan called on the Central Bank to use its tools to curb exchange rate fluctuations in the foreign exchange market. According to him, the US dollar was depreciating against dram because of inflow of US dollars to Armenia.

Kerobyan stressed that the situation is of great concern especially for Armenia's export-oriented and IT companies.

Armenia’s currency, the dram, has strengthened against the US dollar by more than 25 percent since the middle of March. Analysts says one of the reasons behind this unprecedented rally of the dram is the arrival of thousands of Russians to Armenia (after Russia launched so-called special operation in Ukraine) who opened thousands of bank accounts here, ARKA reports.