Commentary - Dollar vs. Dram, Fact vs. Fiction
By Harut Sassounian
Publisher, The California Courier

In the last couple of years, the U.S. dollar has lost more than 40% of its
value against the Armenian currency, the dram.

This devaluation has had a major impact on Armenia ¢s economy on several
fronts:
-- On-going projects in Armenia , funded in dollars from overseas, have
considerably exceeded their allotted budgets, forcing investors and donors either
to curtail their projects in order to remain on budget or substantially
increase their planned expenditures.
-- The stronger dram has reduced Armenia exports, as Armenian products
have become more expensive for foreign buyers.
-- A large number of Armenians, who have been surviving on funds sent to them
from their families overseas, have had their incomes reduced drastically, as
the dollars they receive are worth much less than before.
-- On the positive side, imports from overseas have become cheaper, as the
dram now buys much more in dollars.

The devaluation of the dollar has given rise to speculations as to the true
reasons for the reduction in the value of the dollar vs. the dram. Some have
alleged that by lowering the value of the dollar, the local oligarchs are able
to import cheaper goods. Unfortunately, most of those who have written about
this issue in the press have had no professional training on the subject of
currency exchange, leading them to make uninformed judgments.

Recently, when an acquaintance asked this writer for his opinion on the
alarming rate of the devaluation of the dollar in Armenia , he advised this
individual to contact an expert in financial matters so that facts are separated from
fiction. In response to his queries, Vache Gabrielyan, a Board Member of the
Central Bank of Armenia, wrote a brief analysis, providing his reasons for the
devaluation of the dollar vs. the dram.

Gabrielian explained that in the past 5 years, except for rising investment
and trade flows, the inflow of dollars sent to citizens (not businesses)
through the banking system alone has increased from $420 million in 2002 to$1.2
billion in 2006. These large amounts of transfers or remittances from overseas,
along with other factors, such as productivity improvements, have lowered the
value of the dollar. He said that "due to a high share of migrant workers in
the workforce, as well as a widespread Diaspora, banking transfers (remittances)
are among the most important."

Gabrielyan pointed out that "Armenia's GDP last year was about $6 billion --
i.e., the transfers through the banking sector alone are about one-fifth of
the economy, and the net inflow of banking system transfers to private citizens
-- $450 million, is roughly equal to all the printed cash money in
circulation. In such conditions, the Central Bank, under constraints of not allowing too
much of local currency inflation, has absorbed about one-third of the net
inflow. You may have noticed that exchange rate volatility is less this year.
Still, even after Central Bank intervention, the amount of inflow is so large that
it cannot not have an impact on the exchange rate."

He concluded by saying that "the exchange rate appreciation is going to
continue, and this is not caused by domestic factors. Indeed, US weak dollar
policy, growing oil prices and our regional economic relationships all havean
impact on it. We hope, that appreciation will proceed at a slower pace, and we are
trying to mitigate it the best way we can. Fixing the exchange rate is not a
sustainable policy option, and none of our professional international
counterparts (the IMF, World Bank, etc.) recommends such an action."

Not being an expert in the field of currency fluctuations, this writer cannot
give a definitive assessment of the above analysis. It is hoped that the
level of discourse on this and all other subjects would be taken out of thedomain
of gossip and speculation and turned over to those who are experts in their
respective fields.

Just because the dollar's value is falling in Armenia , one should not
automatically jump to the conclusion that this is due to fraudulent activity. The
Central Bank official provided a seemingly reasonable explanation for the
devaluation of the dollar. If other experts are willing to present their analyses,
this writer will publish them too, providing an opportunity for the public to
have a more comprehensive understanding of the financial situation in Armenia .
Unsubstantiated accusations, offered by those who have no expertise in
currency fluctuations, only serve to blame the wrong parties and mislead a nervous
Armenian public that is already under great financial stress.

CONSTRUCTION GROWS BY 17.2% IN ARMENIA IN JANUARY-JUNE 2007

ON SAME PERIOD OF LAST YEAR
Noyan Tapan
Aug 13 2007

YEREVAN, AUGUST 13, NOYAN TAPAN. Construction work of 171 bln
420.6 mln drams (about 490 mln USD), including construction of
production facilities of 73 bln 386.8 mln drams, was done in Armenia
in January-June 2007. Out of this amount, building and assembly work
amounted to 149 bln 841.3 mln drams, including building and assebly
of production facilities of 56 bln 200.1 mln drams.

According to the RA National Statistical Service, construction done in
January-June 2007 grew by 17.2% on the same period of 2006, including
a 20.1% growth in building and assembly work.

In January-June of this year, 49.1% of construction work was
implemented with resources of the population, while the remaining
part - with organizations' funds.

NUMBER OF TOURISTS TO ARMENIA INCREASES BY 36.3%

IN JANUARY-JUNE 2007 ON SAME PERIOD OF LAST YEAR
Noyan Tapan
Aug 13 2007

YEREVAN, AUGUST 13, NOYAN TAPAN. 181 thousand 239 tourists came to
Armenia in January-June 2007 against 132 thousand 937 tourists in
the same period of 2006. The growth rate made 36.3%.

According to the RA National Statistical Service, 172 thousand 297
people left the country for the purpose of traveling abroad in the
first half of 2007: the growth rate made 37.8%.