The structure of Armenia’s public debt, the rapid growth of consumer loans, and the dynamics of the population’s income today pose serious challenges for the country’s economy. This was stated by former Minister of Finance of Armenia and economist Vardan Aramyan, speaking about the current state of Armenia’s economy.
According to Aramyan’s assessment, Armenia’s economy is in a phase of structural vulnerability. Debt growth, the dominance of consumer loans, and the reduction in capital expenditures could become serious challenges in the long term. In his words, without a review of the economic structure and a strategic approach, the country’s financial stability will remain vulnerable to external and internal shocks.
“Debt Should Be Viewed Not in Nominal, But in Relative Indicators”
Aramyan noted that nominal debt volumes alone say nothing; they must be considered in the context of the country’s income and economic structure. “For example, a debt of 1 million drams can be enormously large if your income is 300 thousand, but insignificant if you earn 2–3 million. Therefore, the main criterion for assessing debt is relative indicators,” the economist emphasized. Although Armenia’s debt-to-GDP ratio was below 50% in 2023, Aramyan reminds that even countries with lower debt levels, such as Russia in 1998 (38%), have experienced debt crises. “All this depends not only on numbers but also on the economic structure,” he stresses. Aramyan is also concerned about the dynamics of debt growth: “Since 2022, the indicators have been deteriorating, and according to the government’s medium-term expenditure program, they could reach 55% by 2028. This is already a dangerous trend.”
Reduction in Capital Expenditures — A Dangerous Signal
According to the economist, it is also concerning that current expenditures will significantly increase at the expense of capital expenditures under the 2026 budget draft. “If a family spends its money only on food and daily consumption, nothing is left for the future. But if it invests, for example, in home repairs or productivity-enhancing programs, that is a capital expenditure that generates income in the future. The same applies to the state,” explains Aramyan. In addition, debt servicing costs already exceed 10% of budget expenditures, and the average maturity of debt is shortening, forcing more funds to be directed toward repaying short-term obligations.
Economic Growth Is Based on Consumer Loans
According to Aramyan, Armenia’s current economic growth model relies excessively on consumer loans. The loan portfolio in July 2025 grew by about 28% compared to the previous year, reaching 1.44 trillion drams, with the majority directed to non-export sectors — mortgage loans, construction, and services. “This is a demand-driven model. When there is money, consumption increases; when there is none, the economy falls. Meanwhile, the export sector — industry or agriculture — develops at much slower rates,” he says. Over the past seven years, the loan portfolio has grown by about 4 trillion drams, but only around 90 billion has gone to industry and about 230–240 billion to agriculture.
The Situation of the Middle and Low-Income Strata Has Worsened
Aramyan categorically disagrees with the thesis that “the majority of the people are living well.” According to him, the middle and low-income strata mainly have only one source of income — wages. The volume of transfers has not grown significantly since 2018 and has even decreased in some cases. Although the average wage has increased by about 30–32% in real terms, this growth does not match the pace of expense increases. Consumer loans over the same period have grown 2.6 times — from about 550 billion drams to 1.6 trillion, indicating that people are forced to take out more loans to cover daily expenses. “Consumer loans are taken by those whose income does not cover even basic needs. And if such a large part of the economy is growing on credit, we must be prepared for potential risks, including an increase in non-payments,” Aramyan warns.