Urgent Measures Needed: Open Letter from Business Leaders to the Central Bank and Ministries

The appreciation of the currency has a significant negative impact on the Armenian economy, both in the short term and long term. It especially harms exporters and companies related to exporting sectors by complicating their sales and sometimes rendering them uncompetitive in foreign markets. This is stated in an open letter by business leaders addressed to the Central Bank of Armenia, the Ministry of Economy, and the Ministry of Finance.

Details follow:

"Companies in the technology sector are already forced to raise the prices of their services by about 20 percent, which will inevitably weaken their competitive positions in foreign markets and lead to the loss of customers.

Those Armenian companies that export wine, brandy, juices, and other agricultural products are also affected, particularly those that have diversified their markets beyond Russian markets to include sales in the USA, European, and Asian markets.

Many companies, in order not to lose their customers, are selling their products in the short term at cost or even below cost, which, for understandable reasons, cannot continue for long. Some companies have temporarily halted exports, hoping for a return to the exchange rate at the beginning of the year in the currency market. Many companies exporting agricultural products now face two choices: either raise their prices and exit competitive markets in the long term or try to source agricultural products more cheaply from farmers or small farming enterprises, which may lead to dissatisfaction or be unrealistic.

The pace of currency appreciation negatively affects tourism and construction sector companies as well, and increases the logistics costs of goods, impacting the prices of international freight transport from Armenia. In the construction sector, costs are calculated based on the dollar-dram exchange rate, which has caused many companies to halt real estate sales, as the depreciation of the dollar has changed the cost of construction—especially in light of the significant increases in building material prices.

The investment sector in Armenia is also not spared from negative impacts, as achieving the same results now requires 20 percent more foreign currency investments, which will lead to significant long-term economic damage. We are confident that at the beginning of the year, no operating entity in Armenia had planned for such currency appreciation in their annual budgets, and many do not have adequate reserves to compensate for the resulting losses.

In light of the above, we urge the Central Bank of Armenia, the Ministry of Economy of Armenia, and the Ministry of Finance of Armenia to take urgent measures to stop further currency appreciation and restore the dram to its early-year exchange rate, or to introduce urgent subsidy programs for exporters that will compensate Armenian exporters according to the exchange rate of the dollar's appreciation."

This statement was released by the "Mantasheants" Business Association (180 large and medium-sized businesses), the Union of Advanced Technology Enterprises (about 100 IT companies), the Armenian Developers Association NGO (uniting more than three dozen member construction companies), and the Expert Association "Export Armenia" NGO (a platform uniting nearly 8000 members).