Following Russia’s Invasion of Ukraine, a strong dram has hurt Armenian exporters while inflation has continued to skyrocket; this is a double whammy of economic misery for Armenians. As of May, vegetable prices in Armenia had doubled from a year earlier; while the price of milk products increased between 10%–27%.
This is caused by pandemic-related logistics problems and the economic fallout of Russia’s invasion of Ukraine. This is a conflict to which Armenia is particularly vulnerable, as Russia is Armenia’s biggest economic partner.
As of June, inflation in Armenia is running at over 10%. Earlier this year, inflation was seen as being linked to the depreciation of the dram, itself a response to the tumbling value of the Russian ruble. But since then, Armenia’s currency has made a dramatic recovery. In July, the value of the dram hit $1 to ֏400, higher than at any point since 2014. For the past four years, its value has averaged ֏485 to the dollar. But this has not brought about an expected easing of inflation.
As strange as it may seem, Russians who moved to Armenia bringing large sums of rubles to Armenia may have played a decisive role in the rise of the dram. Over 100,000 Russian citizens have entered the country and opened tens of thousands of accounts in Armenian banks.
Hrant Mikaelian, a Yerevan-based economist, says that this, along with Armenia’s decision to pay for gas in rubles, has caused the dram to rise. But despite pleas from exporters, the rise in the dram caused by these and other factors has not been met with counter-actions from Armenia’s Central bank.
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