Efficiency is one of the core principles of public financial management. It defines how the performance of state institutions is assessed and whether budget allocations are targeted, calculated, and justified.
Former Minister of Finance and economist Vardan Aramyan evaluated several budget lines using this very logic — the logic of measuring efficiency.
Capital Spending Efficiency as the Main Source of Public Dissatisfaction
According to Aramyan, the nominal volume of capital spending has increased in recent years. But the real issue lies elsewhere. Society is dissatisfied not with the size of expenditures, but with their lack of tangible results.
“It does not matter how many schools or roads are built. What matters is the outcome — physical improvements, social effects, or changes in quality of life,” he explains.
Discussing road construction, Aramyan stresses that economic impact cannot be separated from the security environment. Even high-quality roads lose effectiveness if they lie within the line of sight or threat range of Azerbaijani armed forces.
“No rational economic actor will choose a road overshadowed by an Azerbaijani flag. They will prefer a longer but safe route. This directly reduces the return on public investment and weakens economic impact,” he notes.
Construction Growth Does Not Create Long-Term Economic Value
Aramyan points out that much of the growth in capital construction is driven by the private sector, not the state.
According to official statistics, over 20% growth in capital construction is mainly due to housing projects. However, housing construction does not generate long-term economic value and does not meaningfully contribute to GDP.
He explains that if Armenia were a major tourism hub — like Spain, the Maldives, or the Emirates — residential construction could serve as an investment asset that generates exportable services through hotels or rentals. But under current conditions, housing remains a long-term consumer good and does not create new engines of growth.
The picture is even more concerning given that emigration continues to exceed immigration, meaning that growth in residential construction does not reflect a healthy economic trend.
Police Spending Increases While Crime Rates Continue to Rise
Capital spending is not the only area with low efficiency.
“In 2019, the combined spending of the police and rescue service was around 72 billion drams. By 2025, this figure reached roughly 105 billion drams — an increase of more than 45%,” Aramyan states.
However, higher spending has not yielded real improvements.
In 2019, Armenia recorded about 26,000 crimes, while by the end of 2024 the number had exceeded 40,000.
In January–October 2024 alone, crime increased by 9.8% compared to the previous year.
“The issue is not new cars or equipment. The real question is what change these investments bring to public safety. And statistics show that crime continues to rise,” Aramyan emphasizes.
Higher Social Spending Does Not Improve Demographic Indicators
A similar situation is seen in the social sphere.
Even though social spending has grown for years, birth rates are declining, mortality is increasing, and migration losses are rising.
Thus, rising expenditures fail to deliver the expected outcomes, while key social indicators continue to deteriorate.