Luys Foundation: Armenian government continues to face challenges in  budget planning

ArmInfo.  The underperformance  of budget programs is alarming, as signaled by experts of the Luys Foundation, who have analyzed the report on the execution of the  state budget of the Republic of Armenia for the first half of 2025.  Specifically, the execution of such a key program as the , which is implemented  under the auspices of the Ministry of High-Tech Industry, is less  than 5%.

Close, but no cigar

The Foundation 's experts  note that after a significant slowdown at  the beginning of the year, the economic activity in the Republic of  Armenia began to accelerate again in March, which can be attributed  to the softening of the rate of decline in the industry due to the  base effect, as well as  to the growth of such   industries as services and construction. The industrial sector's  contribution to the growth of economic activity is negative - -2.1  percentage points. Compared to the previous year, the industrial  sector saw a significant decrease in production volumes - 12.1%. The  decline in industry, according to economists, is mainly due to the  decrease in the manufacturing industry, which, in turn, is mainly due  to the neutralization of the re-export factor of precious metals. , - the document says. The neutralization of the gold  re-export factor is not the only reason for the decline in the  manufacturing industry, the Luys Foundation notes. A significant  decline was also recorded in such important sub-sectors as , and  . In the first half of 2025,  export and import  indicators are in a deep decline. Thus, exports decreased  year-on-year (Q2 2025 to Q2 2024) by 32.3%, and imports - by 25.9%,  while a year ago there was a high growth of both exports and imports  by 2.3-2.4 times.

State Treasury Revenues

In the first half of 2025, Armenia's state budget's actual revenues   amounted to 1433.1 billion drams. At the same time, official grants  recorded a 29.4% decrease in the revised plan. According to experts,  the reason for the underperformance  is again the low efficiency of  targeted grant programs.  In the first half of 2025, other budget  revenues significantly exceeded  the  planned indicators  for the  first half of the year and the indicators from  the same period of  the previous year, which is due to a significant increase in revenues  from several types of revenues, which has raised some concerns.  Specifically, the growth in interest payments from the placement of  temporarily free budget funds and deposits in banks and other  financial and credit institutions was mainly due to the fact that  additional free funds were accumulated instead of being spent on  expenses.  As for revenues from fines for offenses, they are  constantly growing, although the current authorities have repeatedly  stated that . As a result, the  fiscal policy actually held back economic development. Meanwhile,  according to the state budget's message for 2025, the fiscal policy  will have a neutral impact on the economy in 2025-2026.

State budget expenditures are not fully met

In the first half of 2025, the actual volume of total expenditures in  the state budget of the Republic of Armenia amounted to 1,472.3  billion drams, which is 14.8% (255 billion drams) less than the  revised plan.  Both current and capital expenditures were not fully  met.  The underfulfillment of programs under the jurisdiction of some  responsible bodies is quite significant. For example, in the case of  the Ministry of High-Tech Industry, the underfulfillment of  expenditures is 72.8%.  The Urban Development Committee is at -  58.7%, the Ministry of Environmental Protection - 34.3%, the Foreign  Intelligence Service - 32.4%, the Ministry of Territorial  Administration and Infrastructure - 22.8%, the Ministry of Economy -  22.3%,  the Ministry of Education, Science and Technology - 20.9%.  The overall picture of program execution is alarming, with a number  of key programs failing to reach even half of their planned targets.  Moreover, many of them have demonstrated extremely low efficiency  over several reporting periods. For example, the implementation of  such a key program as the , implemented under the auspices of the Ministry  of High- Tech Industry, is only 4.7%. The program from the same ministry also stands  out with extremely low indicators - 7.4%. The implementation of the  implemented by the Ministry of  Economy is also alarming: 12.6%.  These facts indicate an  insufficient level of management by the current government.

Deficit lower than planned

In the first half of 2025, the state budget of the Republic of  Armenia had a deficit of 39.2 billion drams, which is approximately  8.3 times less than the deficit planned in the revised plan. This  means that the budget execution deviated significantly (by  approximately 286.1 billion drams) from the initial  plan. The  deficit being lower than planned is mainly due to the higher than  expected  revenues and lower than expected expenditures, resulting in  an increase in available budget funds in internal funding sources.   Economists also point out that the approved budget deficit indicator  was revised from 315.9 billion drams to 325.3 billion drams, while  the actual deficit turned out to be significantly lower than the  approved indicator. This underscores ongoing concerns about the  government's challenges in  budget planning.