ArmInfo. Prime Minister Nikol Pashinyan continued discussions on the fiscal and expenditure policy of Armenia's Medium-Term Expenditure Program (MTEP) for 2026- 2028.
According to the Prime Minister's press service, Finance Minister Vahe Hovhannisyan provided detailed update on the progress made since the previous meeting. He touched upon the approaches underlying the draft state budget for 2026, as well as the assessment of the limits of current and capital expenditures by state bodies, the status of reforms implemented in various sectors, etc. The department heads presented their suggestions and feedback on the implementation of the planned programs and expenditure management. In conclusion, the Prime Minister instructed to hold industry-wide discussions with the Ministry of Finance to finalize the project.
Recall that on June 5 of this year, the Armenian Cabinet approved the PSSR for 2026-2028. According to the document, GDP growth is expected to be 5.1% in 2026, 5.3% in 2027, 5.2% in 2028, and 5.5% in 2029 and 2030. The deflator will be at 2.5% in 2025, and 3% in subsequent years (up to and including 2030). From 2026-2028, government debt will reach 54-55%. Following a constant reduction in the budget deficit, it will approach 50% by 2030 (48% of GDP by the end of 2024, 52.6%, by the end of 2025, 54.6%%, by the end of 2026, 54.(% - 2027 and 55.4% - 2028). Average inflation in 2025 is expected to be 2.5%, then it will approach the target of 3% and stabilize around it in the medium term.
Constantly monitoring economic development scenarios, the Central Bank will take adequate measures to ensure a 3% inflation rate and price stability in the medium term. In the medium term, as a result of improving tax administration, combating shadow economy, as well as tax policy measures, are expected to ensure a continuous improvement in the tax/GDP ratio: 0.7 in 2025, 0.5 in 2026 and 0.2 percentage points in subsequent years, which brings the final tax/GDP ratio in the medium term closer to the effective limit of possibilities within the framework of the current legislation and economic structure, namely 25-26% of GDP. In the medium term for 2026-2028, the task is to ensure fiscal sustainability by reducing the budget deficit, gradually bringing it to 2.8% of GDP from 5.5% of GDP in 2025 (4.5% in 2026, 3.5% in 2027, 2.8% in 2028, 1.8% in 2029 and 1% in 2030). To achieve this, it will be necessary to annually reduce the share of budget expenditures in GDP by about 1 percentage point, with current expenditure in GDP declining in line with the fiscal consolidation objective, and capital expenditure stabilizing at levels well above historical levels, helping to strengthen the economy and infrastructure security. The share of capital expenditure in GDP will stabilize at an average of 5.9% of GDP until 2028, while current expenditure will gradually decline from 24.3% in 2026 to 22.7% of GDP in 2028.
