The 2026 budget can be described as rather conservative, according to former Finance Minister Vardan Aramyan.
He noted that the Ministry of Finance faces certain constraints in presenting the budget.
“These constraints are partly due to the constantly growing budget deficit and the accelerating increase in public debt. Since 2022, the debt-to-GDP ratio has been worsening, and according to the Ministry’s own estimates, this trend will continue until 2028. To at least partially halt this deterioration, the budget deficit relative to GDP needs to be reduced,” Aramyan said.
He explained that the deficit is being reduced by one percentage point — from 5.5% to 4.5%.
“But the question arises: at whose expense is this achieved? The revenue side of GDP increases by only 0.1 percentage points, while expenditures are cut by roughly 0.8 percentage points. The bad news is that this reduction is mainly at the expense of capital expenditures, including in the defense sector,” the former minister noted.
Aramyan reminded that according to international financial statistics (GFS), purchases of military equipment or arms are considered capital expenditures, and their reduction represents a dangerous trend, especially for Armenia.
“At the same time, current expenditures are, on the contrary, increasing. If I’m not mistaken, they will rise from around 200 billion to 220 billion,” he emphasized, urging attention to the structure of these expenditures.
The former finance minister is convinced that the government has fallen into a trap created by the populist policies of 2018–2019. He recalled that initially the income tax refund program was intended to be temporary and aimed at stimulating the construction sector. However, later the program began to be presented as a social measure and was maintained.
“In reality, it was not the socially vulnerable who benefited, but primarily higher-income groups. Over 90% of the program’s beneficiaries were wealthy individuals,” Aramyan said, adding that he had originally warned that this constituted a fiscal trap.
According to him, today that threat has become a reality.
“The 2026 budget allocates about 102 billion drams for income tax refunds. This means the state is effectively financing citizens with medium and high incomes, as well as developers.”
The former minister also expressed concern over rising debt-servicing costs. According to him, the 2026 budget allocates more than 400 billion drams just for interest payments. “If my memory serves me correctly, that’s over 11% of total expenditures. When this figure exceeds 10%, it is already a signal that the state is entering a dangerous zone,” Aramyan said.
He also touched on social expenditures, noting that they increase by roughly 90 billion, of which about 34 billion are directed to the funded pension system.
“This is yet another fiscal trap into which the government has fallen due to its own populist steps. The pension system was designed with the logic of a gradual withdrawal of the state, directing resources to the socially vulnerable rather than future pensioners,” he said.
However, in 2018, the government increased its share in the pension system, further burdening the budget.
“As a result, today taxpayers are financing not current pensioners or genuinely needy citizens, but future pensioners. This is a consequence of an incorrectly structured budget,” Aramyan emphasized.
He noted that the pension reform was initially one of the deepest and most progressive reforms, but its substance was distorted due to the populism of the current authorities.
“The main goal of the reform was for individuals to secure their own retirement through their work. But now the state is once again taking on this burden,” the former finance minister concluded.