Who suffers and who gains from strengthening Armenian dram- entrepreneur
YEREVAN, June 10. /ARKA/. The first who have been suffering from an unprecedented strengthening of the Armenian dram against USD and euro are exporters of agricultural produces, Vahram Mirakyan, the chairman of Mantashev Union of Entrepreneurs, says in a Facebook post.
'For example, if an exporting company bought tomatoes from a farmer at a conditional price of 500 drams per one kg and sold them abroad for $1.2, now it pays the same 500 drams, but has to sell them abroad for $1.4. This situation is used by other exporters whose national currencies have not strengthened, for example, from Azerbaijan, who are forcing Armenian exporter out of the market,' Mirakyan says.
In his words, the same is true with exporters of beverages. 'If a company producing wine exported products worth 100 thousand dollars a month ago, it earned 10% as net profit. Now it will receive the same amount for exported wine, but with a 10% loss. But it has to pay income tax, because on paper it has a profit of 10%,' according to Mirakyan.
'The tourism sphere also suffers. If before a tour package to Armenia offered abroad cost 1000 USD, now it will already cost 1200 USD, so the tourist will think twice before coming to Armenia. Armenia's competitiveness will go down," he writes.
'The real estate development sector is suffering. In the construction sector, prices are fixed by the dollar-dram ratio, and now they will start to raise prices or incur losses because the ratio has changed," explains Mirakyan.
'The IT sector suffers, as Armenia loses its price competitive advantage. For example, if before a certain company from abroad received 100 thousand dollars per month and paid salaries to 20 programmers, now it receives the same 100 thousand dollars and pays salaries to 18 programmers. The other two will either be fired, or they will raise their prices and lose customers", explains the entrepreneur.
'The investment sector suffers. If previously to establish a fruit garden an investor needed, say, $1 million, now they need $1.2 million," he said, summarizing that the sectors that create value and bring money into the country suffer from the strengthening of the dram.
Who gains. Investors who take their money out of the country, to Turkey, China or Russia. Those officials in Armenia who will suffer reputational damage from inflation, because to suspend the strengthening of the dram one needs to inject money into the market, which will lead to higher inflation. In short, according to the businessman, long-term development and growth is sacrificed for the sake of short-term gains.
Armenia’s currency, the dram, has strengthened against the US dollar by more than t 20 percent since the middle of March. Analysts says one of the reasons behind this unprecedented rally of the dram is the arrival of thousands of Russians to Armenia (after Russia launched so-called special operation in Ukraine) who opened thousands of bank accounts here. -0-
