Armenia has improved several indicators of public debt management in recent years. Yet public financial management still faces a serious challenge: responding to market developments and carrying out all planned capital spending. Economist Tigran Jrbashyan, head of the Ameria consulting company, made this assessment.
Non-residents are investing in Armenia’s dram-denominated public debt instruments
In Jrbashyan’s view, Armenia is in a fairly positive position when it comes to managing the budget deficit. It has addressed two important issues in recent years: improving the external debt-to-GDP ratio and increasing the dram-denominated share of public debt.
He said the external debt-to-GDP ratio continues to improve, strengthening the country’s financial position. As a result, Armenia is now a more credible borrower in external debt markets than it was in the past.
A second important change is the growing share of debt denominated in drams. According to Jrbashyan, dram-denominated liabilities now account for a much larger portion of government obligations. This makes the situation more stable. Risks arise especially when a large part of a country’s debt is in foreign currency and exchange-rate fluctuations cause sharp changes in budget indicators. “We have reduced that possibility,” he said.
Jrbashyan also welcomed investment by non-residents in Armenia’s dram-denominated public debt instruments. He described it as another sign of stability.
Capital spending falling short is the main concern
Despite the improvements in debt management, Jrbashyan believes the most important public finance issue this year is not the size of the budget deficit. It is the failure to carry out all planned capital spending.
“When you do not carry out capital spending, you reduce investment in your future potential,” the economist stressed.
He said there are several reasons why capital spending falls short. One is the use of measures alongside monetary policy tools to contain inflation. Another factor is elections.
Jrbashyan explained that, from an economic perspective, election years usually favour increases in current spending but make capital investment harder to implement. Capital projects are difficult to carry out during elections, especially in democracies, where the results can bring a change of government and a review of earlier decisions.
In his assessment, Armenia has faced that situation this year as well.
Capital spending in 2027 will be a new test
According to Jrbashyan, the main challenge ahead is whether Armenia can maintain the relatively strong pace of capital spending it achieved in previous years.
He recalled that capital spending declined for a period after the revolution. This was linked to reforms, including changes to procurement policy and the procedures for implementing capital projects. Spending subsequently recovered, and the country achieved fairly good execution rates.
In 2026, however, capital spending has again fallen short of the plan. The economist expressed hope that the capital spending programme planned for 2027 will not face the same outcome.
He expects capital spending to pick up in the final quarter of 2026. Some expenditure has already taken the form of advance payments but has not yet been fully recorded in the budget because final completion documents still need to be submitted.
Nevertheless, Jrbashyan believes the expected increase in the fourth quarter will not be enough to deliver the entire planned amount of capital spending.
The key question now, he said, is how to plan next year’s expenditure and what signals to send to the market so that the same shortfall does not recur in 2027.
👉 Economy