The Armenian 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 stronger dram has meant less revenue for the vast majority of Armenian information technology (IT) companies that sell their products in Western and other non-Russian markets. Industry executives have increasingly urged the government in recent months to compensate them for their mounting losses.
Prime Minister Nikol Pashinian’s cabinet decided to pay back the bulk of income taxes collected from employees of such firms from June through October this year. Only those entities that exported at least 70 percent of their products and cut their wage bills by no more than 20 percent in that period will be eligible for the compensation.
Government officials said this tax rebate will cost the state 10 billion drams ($25 million). Pashinian expressed confidence that it “will substantially increase the sector’s competitiveness in the international market.”
“Provision of this assistance will help to preserve [IT] jobs without cutting employees’ wages,” Minister of High-Technology Industry Robert Khachatrian said for his part.
Armen Adamian, the founder of the Yerevan-based software firm Esterox, said the tax breaks are “important” but “a bit overdue.” Esterox, he explained, may not qualify for the compensation scheme because some of its engineers were laid off earlier this year.
Adamian said that other local tech companies also resorted to layoffs because of the stronger dram. Some of them closed altogether, he told RFE/RL’s Armenian Service.
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.
The Ministry of High-Technology Industry said in October that despite the dram’s appreciation the sector’s aggregate revenue surged by 56 percent in January-July 2022.
The sector employing up to 20,000 people 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.