The Armenian government on Thursday approved the draft state budget for 2026, projecting economic growth of 5.4% and a gross domestic product (GDP) of $31.2 billion (11.93 trillion drams). The bill will next be submitted to the National Assembly in accordance with the established procedure.
Presenting the draft, Finance Minister Vahe Hovhannisyan said the GDP deflator is forecast at 3%. State budget revenues are projected at $8.08 billion (3.09 trillion drams), including $7.76 billion (2.97 trillion drams) in tax revenues. He noted that the budget aligns with the government program’s priorities, covering key social, educational, healthcare, economic, and infrastructure initiatives.
According to Hovhannisyan, measures to strengthen tax administration, combat the shadow economy, and refine tax policy are expected to raise the tax-to-GDP ratio by 0.4 percentage points. He added that for the current year, the indicator is projected to improve by 1 percentage point compared to 2024.
Budget expenditures are planned at $9.48 billion (3.63 trillion drams), of which $7.64 billion (2.92 trillion drams) will go toward current expenditures and $1.84 billion (704 billion drams) toward capital expenditures. Capital spending is expected to account for 5.9% of GDP in 2026. Overall public spending will rise by about 5% compared to 2025.
The projected budget deficit stands at $1.4 billion (537 billion drams), or 4.5% of GDP, down from 5.5% in 2025. “In the medium term, it will decrease to the 2.8% level that maintains debt sustainability,” Hovhannisyan said. As a result, Armenia’s government debt-to-GDP ratio is expected to reach 53.5% by the end of 2026, remaining below the legally mandated ceiling of 60%.
At the meeting, Hovhannisyan outlined several priority programs included in the budget. Among them is the launch of a comprehensive health insurance system, the continuation of the housing support program for forcibly displaced persons from Karabakh, and the reimbursement of $144 million (55 billion drams) in related expenses. He also noted that salary increases are planned for teachers in general education schools, vocational and extracurricular institutions, as well as staff of pedagogical-psychological support centers, following evaluation and certification processes.
A new system for assessing family insecurity, piloted in two regions in 2025, will be rolled out nationwide in 2026 to tackle extreme poverty. In addition, $25.3 million (9.7 billion drams) will be allocated to support individuals with bad debts, those outside the labor market, and part-time or informal workers.
The government will also continue its cash-back support program for pensioners and benefit recipients making non-cash purchases, with $52.3 million (20 billion drams) earmarked for 2026, up $19.9 million (7.6 billion drams) from the previous year.
As part of education and infrastructure initiatives, $12.8 million (4.9 billion drams) will be directed toward the “Academic City” project, covering design, construction, international consulting services, and contract management. Reconstruction and re-equipment of kindergartens and schools are also planned. In addition, $173 million (66.2 billion drams) will go to the rehabilitation and maintenance of interstate, republican, and regional roads, including bridges and tunnels. Construction of the North-South road corridor will continue, supported by an $80 million (30.6 billion drams) loan, covering sections between Ashtarak–Talin, Kajaran–Agarak, and Sisian–Kajaran, including the Bargushat tunnel. The government also plans the construction of new water dams to increase reserves and improve flow management.
In aviation, a new support program will provide $7.8 million (3 billion drams) in subsidies to airlines launching passenger flights to Yerevan’s Zvartnots International Airport and Gyumri’s Shirak Airport.
Under the 2026 state budget, the “Defense Provision of the Republic of Armenia” program is allocated 563 billion drams (approximately $1.47 billion), a decrease of about 101.5 billion drams (~$264 million), or 15%, compared to the 2025 state budget. Defense expenditures will account for about 15.5% of total spending. Despite the reduction, defense spending in 2026 will remain higher than in any year before 2024. Armenia’s defense budget rose from 306 billion drams ($608 million) in 2021 to 661 billion drams ($1.69 billion) in 2025, with much of the increase used to replenish arms stocks depleted during the 2020 war.
Prime Minister Nikol Pashinyan had anticipated this development in August, stating, “It is possible that in the 2026 budget there will be no significant increase in expenditures, including in defense spending. I think this is logical; at least, this is our current assessment.” In addition, a draft law has been introduced to shorten compulsory military service from two years to 18 months, a measure that, if approved, will impact the size of Armenia’s conscription-based army.
Meanwhile, Azerbaijan plans to allocate $5.12 billion to defense in 2026, an increase of $90 million compared to 2025, underscoring the sharp contrast between the two countries’ military budgets.
Beyond defense, other ministry allocations include:
- Ministry of Internal Affairs: 102.6 billion drams (~$267 million), a 2.2% reduction.
- Ministry of Territorial Administration: more than 325 billion drams (~$850 million), up 21 billion drams from 2025.
- Ministry of Economy: 74.5 billion drams (~$195 million), down 5 billion drams.
- The Ministry of Education, Science, Culture and Sports: 420 billion drams, (~1 billion), a 7% increase
Social protection expenditures will rise to 993 billion drams (~$2.6 billion), an increase of 90 billion drams from 2025. Of this, 591 billion drams will go to pensions, up 30 billion drams (5%) from last year. In addition, support for forcibly displaced persons from Artsakh will grow to 55 billion drams in 2026, compared to 35 billion drams in 2025.
Healthcare spending will rise by 25% to 210.9 billion drams (~$552 million), largely due to the construction of hospitals and clinics.
The government will also allocate more than 423 billion drams (~$1.1 billion) for interest payments on Armenia’s public debt.
Hovhannisyan emphasized that the objectives of the 2026 budget are aimed at social improvement, economic growth, and infrastructure development, with a focus on enhancing public services and improving living standards across Armenia.
