When the Armenian economy abruptly collapsed by over 14 percent in 2009 due to the global economic crisis, there were hopes that the economy would rapidly recover in the following year. However, the recovery was very slow in 2010 with a GDP growth of only 2.6 percent. This was mainly due to a small output in the sphere of agriculture. Whereas in 2009 the volume of agricultural production remained almost intact, it decreased by over 13 percent in 2010 as a result of bad weather and other reasons.

A decrease of agricultural production took place in all three countries of the South Caucasus. The situation became even more difficult due to the rise in world market food prices. These problems underlined to the Armenian leadership the importance of agriculture for the small country, which is poor in natural resources. After President Serzh Sargsyan made a statement in this regard in mid-March, Armenia’s high ranking officials began to compete with each other in demonstrating their concern for the situation in the agricultural sphere. Officials frequently appear on TV when visiting villages, seeking ways help the farmers. Prime Minister Tigran Sargsyan gave an interview sitting in a village yard on the third anniversary of his appointment to office, and the recently appointed Minister of Agriculture Sergo Karapetyan visited a village at night. There was a danger of freezing that night, and the minister was checking if the farmers had everything they needed to prevent the possible disaster. Such symbolic appearances nevertheless raise the real problems of agriculture in Armenia, which cannot be solved without the help of the authorities. Among the problems are uneven development between the rural areas and the capital, and large-scale work migration from the rural areas, causing a shortage of young people in the villages.

There is also a need for low-interest credits to the farmers. The government has already stated that it provides such credits for some communities. It decided to carry the currency risk itself, hence the banks agreed to provide loans in the national currency, Dram, to farmers at 14 percent a year. In addition, the government expressed readiness to pay 4 to 6 percentage points of the interest, providing the farmers with dram loans at 10 percent a year, far below the interest rate of 20-22 percent otherwise applied in the country.

Armenian farmers also suffer from difficulties in obtaining quality seeds and fertilizers, and an irregular supply of irrigation water. The insufficient access to information in villages is a problem which the ministry of agriculture does have the means to solve, but has so far failed to do. The number of uncultivated land plots is increasing, although the farmers gradually become poorer, while farmers also need assistance in selling and exporting their harvest in time.

These are but a few problems of Armenian agriculture, which are shared by many former Soviet countries. The authorities announce that from now on they are “standing next to the farmer”. They are indeed taking numerous steps in order to help the farmers, providing cheap or free water and creating a free economic zone near Zvartnots International Airport, which will mainly engage in the processing and export of agricultural products. The government also provides considerable funding aimed at fulfilling the needs of farmers, a move unprecedented in the last 10-15 years. If this policy is allowed to continue, this would seemingly imply that President Sargsyan’s administration is attaching increasing importance to developing the country’s agricultural resources as a means to strengthen its economy, as opposed to relying on external aid. At a meeting with bankers on April 28 the president said that “Our task is to stimulate agricultural production”, and he was evidently not happy to learn that only three out of Armenia’s 22 banks participate actively in this project. He again expressed a readiness to support and stimulate agriculture.

While it is early to draw conclusions, these recent moves are indeed positive. Questions remain whether Sargsyan’s administration is strong enough to maintain its present policy over an extended period of time, as the president again promised to do at the April 28 meeting. The government’s situation seems increasingly positive for two reasons. First, the perspectives of agricultural production seem promising this year; and second, Sargsyan is currently taking steps towards conciliation with the radical opposition led by former President Levon Ter-Petrosian. Recent signs indicate that the radical opposition movement is seeking to start a dialogue with the authorities, which would remove, if temporarily, a significant factor of political instability.