Thousands of Armenian Workers Face Layoffs After Dramatic Rise of the Dram

Experts put this down to the relative macroeconomic stability in Russia, Armenia’s No. 1 trading partner. Ties go beyond the economic sphere. Armenia is Russia’s strategic ally in the South Caucasus region and hosts a Russian military base, as well as being part of the Russian-led security alliance, the CSTO. Russian troops also maintain a shaky cease-fire after the short war between Azerbaijan and Armenia in 2020 over the disputed territory of Nagorno-Karabakh.

Since Russia launched its unprovoked assault on Ukraine, Armenian Prime Minister Nikol Pashinian’s government has tried to walk a fine line between neutrality and tacit loyalty to Putin.

The creeping rise in the value of the dram is prompting growing concerns from Armenian companies oriented toward Western and other non-Russian markets.

Darbinyan, who said he has invested $5 million in the Gloria factory in the last three years, said he has already appealed to Armenia’s government and the central bank to help weaken the dram.

He is not alone. Similar appeals have been made by other export-oriented entrepreneurs and businesses, notably representatives of Armenian software companies, RFE/RL’s Armenian Service reports.

Martin Galstyan, the country’s central bank governor, made clear on June 12 that the bank will not cut interest rates or intervene in the domestic currency market to cool down the dram. Galstyan said that the stronger dram is somewhat easing inflationary pressures on the Armenian economy aggravated by the Ukraine war.

“By artificially weakening the dram, we would create an even worse inflationary situation that would hit all citizens, including exporters,” he told reporters.

Galstyan also argued that the stronger dram is making many imported raw materials cheaper for exporters.

As Galstyan’s comments suggest, a stronger dram is not all bad news.

Narek Karapetian, a Yerevan-based economist, suggested that the stronger dram will help to curb rising inflation in Armenia.

“This is a major development that will definitely have an impact on consumer prices,” Karapetian told RFE/RL’s Armenian Service.

The Armenian government’s Statistical Committee recorded an annual inflation rate of 8.4 percent in April, up from 7.4 percent in March. According to the committee, food prices in the country rose by an average of 12.1 percent in the first quarter of this year.

Russians who have fled to Armenia may also be bumping up the value of the dram, analysts say. Since the invasion of Ukraine, an estimated 108,000 Russian citizens have arrived in Armenia.

With European destinations closed to Russian airlines, there are few options left. Armenia requires no entry visas, and there are regular flights to Yerevan from Moscow.

According to Armenian authorities, about 27,000 foreigners, most of them Russian citizens, opened Armenian bank accounts between February 24 and the end of March. Also, some Russian tech companies reportedly relocated their personnel to the South Caucasus country to evade Western sanctions.

Russian professionals are particularly interested in the IT sector in Armenia, said Hayk Chobanian, executive director of the Union of Advanced Technology Enterprises, in comments made in March.

Written by Tony Wesolowsky in Prague based on reporting by RFE/RL Armenian Service’s Karine Simonian, Sargis Harutyunyan, and Robert Zargarian