World Bank says Armenia’s public debt has declined compared with 2025

Armenia’s public debt stood at 41.3% of GDP during the first five months of this year, down from the end of 2025, although it could rise to around 50% in the second half of the year, Armine Manukyan, Senior Economist at the World Bank Group, said while presenting the report Armenia Economic Update: Pursuing Poverty-Reducing Growth Through More Effective Fiscal Policies on July 29.

“In the 2025 budget, the fiscal deficit was projected at around 5.5% of GDP, but the year ended with a deficit of 3.8%. This was mainly due to savings in current expenditure and some underexecution of capital spending, although capital expenditure has increased significantly in recent years. During the previous decade, capital spending averaged around 3% of GDP, whereas it is now about 6%. A very ambitious target had been set, and the capital expenditure programme was therefore not fully implemented.

“There was also strong tax revenue collection, which resulted in a smaller deficit. During the first five months of this year, the budget deficit had been projected at 1.7% of GDP, but it stood at 0.2%. This was mainly due to lower-than-planned capital expenditure. Capital spending is expected to increase in the second half of the year,” Manukyan said.

She noted that budget revenues increased by 15%, mainly due to higher value-added tax (VAT) and personal income tax receipts. According to Manukyan, the number of income taxpayers has risen alongside growth in salaried employment, while higher wages have also contributed to stronger personal income tax collection.

Manukyan said Armenia’s public debt amounted to 41.3% of GDP during the first five months of the year, lower than at the end of 2025.

“However, we expect it to increase in the second half of the year, driven by capital expenditure and the budget deficit, reaching around 50%,” she said.

Commenting on inflation, Manukyan noted that there was no price growth in Armenia in 2024, but prices began to rise the following year, with inflation accelerating further this year.

“Inflation has mainly been driven by food and non-alcoholic beverages, largely due to higher prices on international markets. It has also been influenced to some extent by the depreciation of the Armenian dram against the Russian rouble, as Armenia imports most of its goods from Russia.

“Healthcare costs have also increased to some extent since 2025. Transport prices are another contributing factor. We expected increases in transport and energy prices to have a stronger impact on inflation in Armenia, but compared with other countries, the effect has so far been more limited,” the economist said.