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Ukraine War Boosts Armenian Currency


Armenia -- A statue symbolizing the national currency, the dram, outside the Central Bank building in Yerevan.

Mirroring exchange rate fluctuations in Russia, Armenia’s national currency, the dram, has strengthened significantly during the continuing war in Ukraine.

The dram weakened against the U.S. dollar and the euro by more than five percent in the first weeks following the start of the Russian invasion of Ukraine. That was a clear consequence of the West’s crippling economic sanctions against Russia, Armenia’s number one trading partner and main source of cash remittances.

The Russian ruble lost around half of its nominal value in late February and early March. But it rallied strongly in the following weeks, boosted by a fall in imports, interest rate hikes and unprecedented capital controls imposed by the Russian authorities.

The ruble also benefited from by Moscow’s decision to require European Union consumers to pay for Russian natural gas in rubles. The Russian currency is now stronger than it was before the war.

The dram has similarly strengthened against the dollar by almost 20 percent since the middle of March.

Analysts regard the stronger ruble as the key factor behind the steady appreciation of the dram which continued this week.

The Armenian currency may have also been boosted by thousands of Russians who moved to Armenia and/or opened bank accounts there after the war broke out on February 24.

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

RUSSIA -- A man walks past a currency exchange office in central Moscow on February 28, 2022.
RUSSIA -- A man walks past a currency exchange office in central Moscow on February 28, 2022.

The Central Bank of Armenia (CBA) has so far not commented on the dram’s appreciation which has prompted concern from some local exporters.

Over the past month, the Russian authorities have eased their capital controls and significantly cut interest rates, causing a slight weakening of the ruble. By contrast, the CBA has refrained from lowering its benchmark refinancing rate raised in mid-March.

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.

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