Armenia`s 2026 draft state budget lacks a clear strategy despite the numbers presented: David Ananyan

ArmInfo. The dry figures of Armenia's draft state budget for 2026 conceal a lack of strategy. Thus, the lion's share of state treasury revenues will be provided through taxes, while overall expenditures, including capital expenditures, particularly, are planned without KPIs or performance assessments. The deficit will be covered by external loans. Therefore, while the RA state budget may appear balanced in terms of numbers,  it is lacking in content and can be sees as a "life support" budget, according to David Ananyan, economist, PhD in Economics, and former head of the State Revenue Committee.

Thus, according to the draft state budget for 2026, approved by the Cabinet of Ministers on September 25, Armenia's GDP growth is projected at 5.4%, with a deflator of 3%, and a deficit of 4.5%. State treasury revenues are expected to reach 3 trillion 091 billion drams, with 2 trillion 972 billion drams (850 million drams) coming from taxes and state duties. "96% of budget revenues are generated from taxes and duties, while official grants and other sources together account for only 4%. This means that Armenia continues to rely solely on the tax burden, without creating new sources of investment. The tax-to-GDP ratio is planned to increase to 25-26%, which is welcomed. However, without strong reforms in the investment sector, this growth could result administrative pressure rather than in economic stimulation, " Ananyan wrote on his Facebook page.

Expenditures are planned at 3 trillion 628 billion drams. Of this, current expenditures will amount to 2 trillion 924 billion drams, and 704 billion drams will be allocated for capital expenditures (or 5.9% of GDP, versus 6.6% fixed in the 2025 state budget). However, the expert notes that there is no clear calculation of the outcomes these expenditures will produce, how many jobs will be created, what kind of export growth is expected, or how much labor productivity will improve. Specifically, the implementation of a health insurance system (the process was postponed several times due to a lack of budgetary funds for this purpose, and the authorities now promise to launch the system in 2026 - ed.) and educational infrastructure development programs (approximately 300 schools and 500 kindergartens) are certainly important, "but here, too, the "expenditure" approach prevails, without taking into account the economic return."

The former head of the State Revenue Committee emphasized that, defense spending continues to be presented in general figures without any clarification (in 2026, Armenia will reduce appropriations to the Ministry of Defense by approximately 15.2% - from 664.7 billion drams to 563 billion drams, or approximately 1.5 billion US dollars - ed.). "In general, the secrecy is understandable, but it would be good to have an idea, for example, of how much will be spent on weapons modernization, air defense, unmanned systems, cybersecurity, etc. Every billion drams in the defense sector should become life insurance, and not another "item of expenditure," " he writes.

According to the draft budget, the deficit will reach 537.5 billion drams, or 4.5% of GDP (compared to 609 billion drams, or 5.5%, in 2025). 271.3 billion drams will be allocated from external sources to cover the deficit, and 266.2 billion drams will be allocated from domestic sources.

"That is, almost half of the deficit will be covered by external debt. As a result, public debt will remain within 54-55% of GDP in the medium term. This isn't a crisis in terms of numbers, but for a small economy like Armenia, increasing external dependence poses a serious threat," Ananyan notes. (By the end of 2026, public debt will reach 6 trillion 569 billion drams, or 55% of GDP, while government debt will grow to 53.5% of GDP, or 6 trillion 384.7 billion drams ($15 billion 331.5 million) - ed.).

The economist believes that Armenia's  budget for 2026 is balanced in terms of numbers, but in terms of content, it remains a "life support" budget. The government appears to lack the will and ability to change its emphasis and make it a guide for development, so Armenia will once again act as a country ensuring fiscal accounting rather than implementing an economic recovery program," David Ananyan concludes.