25 replies to this topic

[gamavor]

It is a risky business, but they’re few more arguments in favor of such move. First, many of Armenian’s export and import trade partners either effectively belong to the Euro-zone, or are about to enter the Euro-zone. Even Russia will soon need to re-calculate her trade balance in Euros - meaning price tag in rubles, but with Euro value.

Despite the fluctuations on the International currency market, staying in long dollar position bears more risk than accidental or potential losses incurred by eventual conversion of part of Central Bank reserve.

[Armen]

I agree in part, Gamavor. But wouldn't that action appreciate Dram even more at present? Do we need that? It is already too strong. For a country like Armenia a relatively higher rate of inflation for longer periods of time compared to its neighbours is more preferable I think. Just like Japan in East Asia.

And pegging Dram to Euro will be a short term gain. If they do it skillfully with precise knowldge they may well benefit. But again it is too risky. Just imagine the dicision making process in the Armenian government...

Also, I think Armenia needs to work on other markets. Other than Europe. Our businessmen are too short sighted and very risk averse. I can't believe Armenians have become this risk averse in business. They don't see the world beyond Dubay! Our business is not present in the biggest and fastest growing markets of China, India and Aisa in general. This is just silly. The whole world is selling there except us. I imagine if the brandy company could enter the Chinese market. A little bit, like some 3 mil Chinese fanatics of brandy and Cigaronne in the coastal cities. You don't even need to go deep into inland. Or just be present in the Duty free shops in the airports. Don't know. I don't see Europe as a long term economic solution for Armenia.

[gamavor]

Yeap, I'm all for it. If Nokia can do business in China, why not Armenian Cognac and cigarettess.

I'm advocating only partial adjustment of the Central Bank reserve to Euro. That way, at least Armenian exports that are Europe oriented will be protected.

As to the strong Dram - I have no opinion. Acctualy I prefer 1 Dram = 1 Euro.

[Armen]

ARMENIA'S NEGATIVE TRADE BALANCE TOTALS $176.5 MLN IN JAN-MAR, 2005



YEREVAN, MAY 2. ARMINFO. In Jan-Mar 2005 foreign trade balance of

Armenia made up $176.5 mln (84.9 bln drams). The humanitarian aid

exclusive this showing made up $165.0 mln (79.5 bln drams). The

foreign trade balance, when estimation of the exports and imports at

FOB-costs (free on board), totalled $128.2 mln.



ARMINFO was informed in the National Statistical Service of the

Republic of Armenia, the foreign trade turnover of Armenia in Jan-Mar

of the current year as against the same period of last year increased

by 28.1% and totaled $566.4 mln (269.8 bln drams). The article of

brilliants exclusive this showing increased by 24.6% and totaled

$427.3 mln.



In the structure of foreign trade turnover the exports increased by

28.4% and made up $194.9 mln (92.4 bln drams) in FOB-prices by late

Mar, 2005, and imports increased by 27.9%, totaling $371.5 mln

(177.4 bln drams) in CIF-prices (cost insurance and freight). The

article of brilliants exclusive the exports increased by 29.4%, and

the imports - by 22.4%, totalling $134.2 mln and $293.2 mln

respectively.



In Jan-Mar, 2005 the trade turnover with countries of the European

Union totaled $216.8 mln, the exports with EU countries totaled

$90.9 mln, and the imports - $125.9 mln. The negative balance with

EU countries totaled $35.0 mln. Goods worth a total of $71.9 mln

were exported to foreign countries, and the imports totaled $163.0

mln. Negative trade balance with remote foreign countries totaled

$91.1 mln.



In the period under review, Armenia's foreign trade turnover

with the CIS countries totaled $114.8 mln. Goods worth a total of

$32.2 mln were exported to the CIS countries. Imports from those

countries totaled $82.6 mln. Armenia's negative foreign trade

balance with the CIS countries totaled $50.4 mln.



Germany (19.5% of the total volume of export), Israel (16.1%),

Belgium (13.0%), Russia (10.1%), Netherlands (9.3%), Switzerland

(7.8%), the United States (4.8%) and Georgia (4.4%) are the major

purchasers of Armenian goods. The major deliverers of imported goods

are Russia (16.2% of the total volume of imports), Great Britain

(6.6%) and USA (5.6%).



In exports growth was registered: non precious metals and goods made

of them (2.8 times), precious metals and goods made of them (24.1%),

and mineral product - 28.8% drop. In imports decrease was registered:

nonprecious metals and jewelry items made of them (23.9%), precious

metals and goods made of them grew by 49.8%, and the import of

mineral products increased by 16.7%. -S-

[Armen]

MF representative in Armenia: dram's revaluation is "conditioned by objective reasons" -02.05.05

Yerevan, May 02. /Mediamax/. Resident representative of the International Monetary Fund (IMF) in Armenia, James McHugh, thinks that the revaluation of the Armenian dram "is conditioned by objective reasons."

Addressing a press conference in the Armenian Central Bank (CB) today, James McHugh said that besides external factors there are also internal ones promoting the strengthening of the national currency, particularly the increase of the volume of private transfers and high rates of the economic growth, Mediamax reports.

Member of the CB Board, Vache Gabrielian, said in his turn that the revaluation of the dram is profitable for the Armenian population, since during 2004, the incomes in drams have noticeably increased, compared to the currency incomes.

According to Vache Gabrielian, as of first 4 months of 2005, the Central Bank of Armenia keeps the inflation within 3%. This allows foretelling that at the end of 2005 CB will manage to keep the inflation within 3%, as envisaged by the state budget. -0--

[Armen]

Dram Appreciation Halts Armenian Power Supplies To Georgia

By Karine Kalantarian and Atom Markarian

A Russian-owned company has stopped sales of Armenian electricity to Georgia, citing substantial losses incurred as a result of the dramatic appreciation of the dram, which is putting a growing strain on Armenia’s exporters.

A sales manager at the International Energy Corporation (IEC), Garegin Baghdasarian, said on Monday the power supplies ceased Sunday morning and will resume only if Georgia’s Telasi power utility agrees to pay a higher price for them.

“We have incurred substantial losses in the past two months,” Baghdasarian told RFE/RL. “The dollar was worth 500 drams when we signed the sales agreement [with the Georgian side]. It is now worth 440 drams. We buy electricity [from Armenian power plants] in drams and sell it to Georgia in U.S. dollars.”

The dram has strengthened against the dollar by as much as 10 percent since January and about 30 percent since the beginning of last year. Its appreciation against the euro has also been substantial.

The owners of export-oriented Armenian companies are beginning to express concern about negative consequences of the unprecedented phenomenon, saying that it is making their products less competitive abroad. A Yerevan-based factory producing electrical lamps reportedly suspended its work last month for that reason. A large part of its production was sold in Georgia.

Baghdasarian said IEC stopped making profits late last year and began operating at a loss when the dram’s strengthening again accelerated a month ago. He said the company has offered Telasi, which runs the power distribution network in Tbilisi, to negotiate a new price and is still awaiting a response.

IEC supplied Telasi with 2.45 million kilowatt/hours of electricity a day at 2.75 U.S. cents per one kilowatt/hour. Incidentally, both firms are owned by Russia’s state-run power utility, the Unified Energy Systems (UES).

The Armenian authorities maintain that the dram’s surge against the world’s two most important currencies results from a drastic increase in multimillion-dollar cash remittances sent home by Armenians working abroad. A large part of Armenia’s population lives off that money and has therefore been hit hard by the exchange rate change.

Government critics allege a high-level conspiracy designed to benefit a small number of government-linked importers of basic commodities to Armenia. The Armenian Central Bank, which sets the exchange rate, denies the charges.

The official explanation for the dram’s appreciation was on Monday again endorsed by a senior official from the International Monetary Fund. “We fully support the Central Bank in its monetary policy,” James McHugh, the IMF’s resident representative in Yerevan, said at a joint news conference with a member of the bank’s governing board, Vache Gabrielian.

“We don’t share the claims that the country stands on the brink of collapse,” Gabrielian told reporters. “We believe that the existing regime has served the Armenian economy quite well.”

Gabrielian also said the Central Bank will intervene only if the exchange rate fluctuations become “very drastic.” “A smooth currency appreciation is a normal phenomenon,” he said.

McHugh, for his part, refuted a report in a government-run newspaper which quoted him as saying that the IMF itself told the Central Bank last year to boost the dram in order to curb inflation. He said he was misquoted by the reporter.