Government to Provide Additional Benefits for Dairy Producers Exporting to Russia

The Armenian government has adopted a relevant decision during today's session to alleviate the burden of foreign currency loan agreements contracted for the procurement of agricultural raw materials.

The justification notes that due to the recent sharp appreciation of the Armenian dram, businesses are incurring significant losses when converting payments received under these foreign currency contracts into drams, making it difficult for them to service the loans they have taken out.

"Difficulties in servicing the loans are also caused by the closure of the Upper Lars border checkpoint due to weather or other reasons," the decision states.

In 2022, loans were provided for sectors other than grapes with a repayment term of 1.5 years and a 6-month grace period, with a 10% subsidy. For grape procurement, loans were issued until September 1 for up to 3 years of repayment and a 1-year grace period, with a 10% subsidy, while from September 1 until December 30, 2022, loans were granted for up to 4 years of repayment and a 2-year grace period, with an 11% subsidy.

The recent decision by Russia to impose a ban on the export of dairy products from Armenia has created significant difficulties. It is possible that Russia may later apply similar bans on other products of Armenian origin, impacting a considerable number of organizations that export goods to Russia.

The decision proposes that the loans issued in 2022 (excluding the sectors of grapes, cold storage, and the purchase of agricultural animals for slaughter) provide participants in the program, with mutual agreement from financial institutions and stakeholders, additional grace periods for the repayment of the principal amount of the loans (up to 6 months) and an extension of the repayment deadlines by up to 6 months.

"Repayment deadlines for loans issued after January 1, 2023, can also be extended by up to 6 months, subject to mutual written agreement between participating financial institutions and interested parties and the Ministry of Economy of Armenia, if, in the 12 months preceding the date of application, more than 70% of the total revenues of the interested party were generated from exports, and export became impossible due to objective reasons unrelated to the economic activity of the applicant," the decision specifies.

This decision will allow beneficiaries to secure additional loans, servicing loans contracted in 2022 for the procurement of milk and fruits and vegetables with a modified repayment schedule. Furthermore, certain beneficiaries will be granted the opportunity to extend the grace periods and repayment deadlines up to 6 months due to the ban on dairy products to Russia. In terms of milk and fruits-vegetables procurement, it is estimated that additional subsidies amounting to around 270 million drams may arise if all beneficiaries take advantage of the loan subsidy and repayment deadline extension opportunities.