Wednesday, February 09, 2005

Radio Free Europe / Radio Liberty
8 February 2005

January Inflation Adds Strain To Family Budgets

By Heghine Buniatian

Key consumer prices in Armenia jumped by 5.4 percent last month, by far exceeding an inflation rate forecast by the government and the Central Bank for the entire year, officials said on Tuesday.

Gurgen Martirosian, a senior official at the National Statistical Service, told RFE/RL that the January inflation was pushed up by an 8.4 percent surge in prices of basic food products that account for the biggest share of household expenditures in the country.

The price increase calls into question the Armenian authorities’ pledge to keep the inflation rate within a 2.5 percent limit in 2005. They hope that it will be offset by seasonal deflation which traditionally happens in Armenia in the summer and early autumn.

Speaking to reporters on Monday, the chairman of Armenia’s Central Bank, Tigran Sarkisian, said the inflation averaged 7 percent last year and remains under control. Martirosian clarified that the food prices were 11 percent up from the 2003 levels, with bread and other wheat products alone costing 20 percent more.

Many Armenians, however, feel that the cost of life has been growing more rapidly than is shown by official statistics. “Many things are now twice as expensive,” said one woman as she shopped in a grocery store. “I remember, for example, buying a chicken for 700 drams ($1.5). Now you have to pay 1,500 drams. Meat cost 900 drams last year but is worth 1,500 drams this year. People’s salaries haven’t grown that much, have they?”

“We could make our ends meet with 100 dollars a year ago, but it’s not enough anymore,” agreed another Yerevan resident. “Everything is now more expensive: potatoes, onions, milk and other products.”

The price hikes have come amid a dramatic appreciation of the national currency, the dram, against the U.S. dollar and the euro since the beginning of 2004. A large part of foods sold in the Armenian market are imported from abroad and should have presumably been made cheaper.

Commenting on this paradox in a newspaper interview last week, the executive director of the Armenian Bank Association, Vladimir Badalian, indicated that lucrative food imports have effectively been monopolized by a small group of wealthy local businessmen.

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