Navigating Currency Turbulence: Strategies for Armenia’s Tech Sector

· April 12, 2024

By Aram Ter-Martirosyan

The Armenian tech industry faces mounting financial challenges amid currency fluctuations. With the Armenian Dram appreciating against a depreciating dollar, tech startups are struggling to secure funding from U.S. venture capitals. Moreover, established tech companies find it increasingly difficult to maintain staff, as the rising Dram inflates operational costs linked to fixed-dollar contracts with international partners. This economic environment has already led to closures within the IT sector and a surplus of available tech talent. Without resolution on the horizon, the situation may worsen, potentially driving skilled IT professionals to seek employment abroad, where opportunities in more stable economic climates await.

Strategic Solutions To mitigate these challenges, Armenian tech companies can adopt several strategies:

• Diversifying Funding Sources: Exploring investment opportunities beyond U.S. venture capitals, such as European or Asian investors and international tech incubators.

• Hedging Currency Risks: Using financial instruments like forwards and options to manage exchange rate fluctuations effectively.

• Cost Management: Enhancing operational efficiency and implementing stringent cost-control measures.

• Expanding Market Reach: Entering new markets with stronger currencies or more stable economic conditions to diversify revenue streams.

• Employee Retention Strategies: Implementing benefits not directly tied to currency values to retain talent.

The government can significantly bolster the tech sector by:

• Subsidies and Financial Support: Offering tax relief and subsidies to alleviate the financial strain on startups.

• Contract Facilitation: Helping firms secure domestic and international contracts to stabilize revenue.

• Promotion at International Trade Shows: Financing participation in global tech expos to enhance market presence and attract foreign investors.

Support from the Armenian Diaspora

The Armenian Diaspora, particularly its scientists, engineers, and businessmen, can play a crucial role in bolstering Armenia’s tech industry amidst economic challenges. By investing in Armenian tech companies, providing mentorship, sharing expertise, and facilitating introductions to international networks, the Diaspora can help mitigate the effects of currency fluctuations. Moreover, their involvement in lobbying for favorable government policies and encouraging direct investment could provide a much-needed boost to sustain and grow the sector. Their active participation could serve as a bridge connecting Armenian tech enterprises with global opportunities, fostering innovation and stability in the industry.

The rapid appreciation of the Armenian Dram poses both challenges and opportunities for the tech sector. By adopting targeted strategies and leveraging government support, Armenian tech companies can not only survive but thrive in this turbulent economic climate. The focus should be on creating a resilient and adaptive industry that continues to attract investment and retain talent, ensuring long-term growth and stability.