March 13, 2009 - 21:45 AMTPanARMENIAN.Net
- Armenian dram
was overvalued by about 20-30% prior to devaluation in March 2009, IMF Resident Representative in Armenia said.
"Now that the dram has depreciated by about 20%, it should be brought to equilibrium," Ms. Nienke Oomes said at a meeting with students of Yerevan State University.
Explaining why dram devaluation was necessary, she said, "Armenia's real effective exchange rate was appreciated rapidly in recent years. During 2005-2007, real appreciation was accompanied by nominal appreciation, which was mostly the result of large foreign exchange inflows as well as high export prices, notably for copper and molybdenum. During 2008, the Central bank of Armenia kept nominal AMD/USD rate within a very tight band. To do this, the CBA had to increasingly sell large amounts of dollars, especially in the last few months, which led to a significant loss in CBA reserves."
"Because of the global financial crisis, there has been a significant reduction of foreign currency inflows into Armenia. Export prices have fallen significantly. Copper and molybdenum prices lost about 2/3 of their value, leading to lower export revenues for exporters. Global demand for Armenian exports has fallen, meaning a further reduction in export revenues. In addition, the Russian economy is experiencing serious problems, meaning a reduction in remittances and foreign direct investment," Ms. Oomes said.