Russia’s war turns neighbouring currencies into world’s best

The Russian exodus triggered by Vladimir Putin’s invasion of Ukraine has put the currencies of former Soviet republics at the top of global rankings this year. 

Georgia and Armenia in the Caucasus Mountains, as well as Tajikistan in Central Asia, are among the best performers against the US dollar since tens of thousands of Russian citizens settled there from February 2022 onwards, bringing the equivalent of billions of dollars in savings with them. 

The small countries make appealing bolt-holes because no travel visas are required, Russian is widely spoken and there are no restrictions on moving savings to local banks. 

That’s driven Armenia’s dram up more than 22% against the dollar since the start of 2022, the top gainer among currencies worldwide, data compiled by Bloomberg show. Georgia’s lari and the Tajik somoni are stronger by more than 16% and 10%, respectively, beating the gains for Russia’s rouble, which is no longer a freely traded currency since emergency capital controls put a floor under its collapse.  

“It’s Russians, moving to these countries for a long time due to geopolitical issues, who keep their money in such currencies and push up the exchange rate,” said Natalia Milchakova at Freedom Holding Corp.

The war explains the fivefold increase in remittances entering Georgia from Russia so far this year, equivalent to more than 60% of all transfers and exceeding $1.75bn, according to the National Bank of Georgia. Money transfers to Armenia amounted to $2.8bn in the first 10 months, a near-quadrupling compared with the same period of 2021. In October, they hit the highest level since at least 2004, the Armenian central bank said.