They claimed that several local tech firms have already closed while many others are increasingly struggling to cope with the resulting drop in their dram-denominated revenues. They accused the Armenian government of doing nothing to shore up the sector.
The dram has appreciated against the U.S. dollar by about 22 percent and even more strongly against the euro since the start of the war in Ukraine. Its value has been primarily pushed up sharp rises in Armenian exports to Russia and Russian cash remittances to the South Caucasus country.
The vast majority of Armenian information technology (IT) companies sell their products in Western and other non-Russian markets. For them, the stronger dram therefore means less revenue.
“The continuing deterioration of the financial situation is leading many companies to ruin,” said Gevorg Safarian of LimeTech, a Yerevan-based company producing payment terminals and other customer service systems.
“This [government] indifference is unacceptable. Steps must be taken to stop this,” Safarian told a joint news conference with other tech executives.
“Companies that have for decades developed in a natural environment and created teams performing complex tasks are now on the brink of collapse,” said Armen Kocharian, the chief executive of the Software development company VOLO.
Arman Poghosian, who runs the Instigate Group comprising over a dozen tech firms, also hit out at the government.
“It’s not clear why they don’t care about losses suffered by the sector,” said Poghosian.
The Armenian Ministry of Economy declined to respond to the criticism mainly voiced by homegrown firms. Armenian subsidiaries of U.S. tech giants like Synopsys, National Instruments, Mentor Graphics and VMware have not publicly expressed such discontent so far.
Economy Minister Vahan Kerobian echoed the sector’s concerns in July, saying that an exchange rate of 450 drams per dollar is a “red line for our economy.” The dollar was worth only 395 drams on Wednesday.
Armenia’s Central Bank made clear in June that it will not cut interest rates or take other measures to weaken the dram. The authorities promised instead to support the IT industry with a major tax break. A corresponding bill drafted by Kerobian’s ministry has still not been sent to the Armenian parliament for approval, however.
The IT industry dominated by software developers has long been the most dynamic sector of the Armenian economy, having grown at double-digit annual rates since the early 2000s. A recently released list of the country’s 1,000 largest corporate taxpayers included 39 tech firms.
News.am cited the Armenian Ministry of High-Technology Industry as saying on October 20 that despite the dram’s appreciation the sector’s aggregate revenue surged by 56 percent in January-July 2022.
The sector was boosted by thousands of mostly young Russians who relocated to Armenia following Russia’s February 24 invasion of Ukraine. Many of them are computer programmers or other IT professionals.