Armenia's 2026 Budget: Deficit, Debt Defense

The state budget deficit in the draft Budget-2026 is planned at 537 billion drams, 4.5% of GDP, compared to 5.5% in 2025, decreasing in the medium term to 2.8%, which keeps the debt burden stable. The details were presented in Parliament by Finance Minister Vahe Hovhannisyan.

"Our goal is to continuously reduce the budget deficit and keep the public debt in a stable and manageable range, maintaining it at around 50% in the medium term. In this context, it is essential to emphasize that we are implementing programs aimed at increasing economic potential, directed at the development of infrastructure and human capital, while targeting an increase in efficiency and productivity," noted the Finance Minister.

Hovhannisyan also elaborated on the topic of the RA public debt. "I often read that our public debt has doubled since 2018. ... Now let's understand what the picture is under the conditions of Armenia's doubled debt, which, by the way, has not doubled or increased by 100%, but by 80%. And so, in the last seven years, we have increased revenues so much, including by attracting debt, that if we decided in 2026 to return to the spending level of 2018, we could pay off that entire debt in just one and a half years," noted the minister. "If we imagine for a moment that we have decided to pay off the debt taken since 2018 in one and a half years and we return to the spending level of 2018, then we would have to cut all our expenses by 58%. If we returned to the 2018 spending level, we would have to cut defense spending by 429 billion drams or about 65%, education spending by 178 billion drams or 60%, 60%.

Social spending by 489 billion drams or 54%, spending on economic development by 117 billion drams or 50%. Now you decide for yourselves: is our debt manageable, and should we return it to the 2018 level right now?" the minister stated from the NA rostrum. He emphasized the increase in the share of dram-denominated debt in the debt structure. "And if at the end of 2018 the share of dram debt in the government debt structure was only 19%, then over the next six years it has continuously grown, reaching about 50.8% in 2024. These changes have allowed us to achieve several important results simultaneously. First, to significantly reduce the exchange rate risk, that is, to ensure the stability of debt servicing against foreign currency fluctuations. Second, to meet the government's financial needs mainly at the expense of the domestic financial market's savings, as a result of which interest payments on the debt are paid mostly to residents of the country. And third, to contribute to the development of the government bond market, which is the cornerstone of the development of the overall financial market. That is, the debt we have today is structurally multiple times higher in quality and more stable than what we had in 2018," noted Vahe Hovhannisyan.

According to the minister, the Armenian government treasury bond market has now become interesting and attractive for international investors as well. "If in 2018 the participation of foreign investors in the domestic debt market was only 3.6 billion drams, then as of September 30, 2025, it has already reached 177 billion drams. That is, the confidence of international investors in the state institutions of the Republic of Armenia is higher today than ever before.

Moreover, if in March 2025 the country's risk premium in the yield of the 10-year Eurobonds issued was 286 basis points or 2.86%, then after the signing of the Washington Declaration on August 8, it decreased to 227 basis points at the end of September. This is a historically low indicator," emphasized the Finance Minister.