Pashinyan discusses  fiscal and expenditure framework of  Medium-Term  Expenditure Program (MTEP) for 2026-2028

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.