Armenia's state budget - 2025: Former Finance Minister assesses risks of main financial document

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YEREVAN, 3 November. /ARKA/. Armenia's former Minister of Finance Vardan Aramyan analysed the structure of the country's state budget for 2025 and assessed possible risks./pp

In an interview with Public Television of Armenia, he pointed out that Armenia's 2025 state budget is generally a continuation of the 2024 state budget./pp 'It seems that the budget is balanced and capital spending is high, as it was in 2024. There is no significant increase in current expenditures in terms of state agencies, mainly, the increase in budget allocations affected the spheres of defence (by about AMD 110 billion), social sector (also by AMD 110 billion), the Ministry of Finance (by AMD 50 billion), the Ministry of High Technologies (by AMD 22 billion), education (by AMD 13 billion),’ Aramyan stated./pp

He added that more conservative behaviour is observed in terms of other state bodies, but it should be taken into account that the budget is based on the economy and its riskiness is assessed depending on the economic targets (goals). ‘The government promises a certain expenditure scenario, for the fulfilment of which it needs resources, the sources for which are two - the revenue (taxes) and the deficit (of the budget),’ Aramyan said./pp

Budget revenues and their risks/pp

Speaking about the risks to the revenue, he outlined that the 2025 budget envisages improving the tax-to-GDP ratio by 0.7 percentage points, almost the same as last year./pp ‘This scenario contains significant risks, because if unrealistic goals are set for state agencies, especially for the tax authority, the latter's behaviour changes - the tax authority will ‘pull’ revenues from the economy at any cost,’ Aramyan said./pp

He warned that this is fraught with deterioration of business environment, weakening of economic potential and expectations of economic entities./pp

Economic structure/pp

As the former minister noted, the main financial document of the country shows the leading non-taxable sectors of the economy - capital construction, trade, which in comparison with export industries bring less tax revenues./pp ‘’Performance of the budget for 9 months already shows under-fulfilment of tax revenues by about 150 billion drams,‘’ Aramyan stressed. In this regard, he noted that if fundamental sectors of economy are not taken into account, fixing wrong targets and obligations stemming from them, it is akin to laid hidden bombs./pp

Ministry of Finance's position/pp

At the same time, Aramyan praised the behaviour of the Finance Ministry, which has been disciplined in outlining possible risks in the budget and managed to fix the AMD 95 billion Reserve Fund to manage fiscal risks./pp ‘Is it a little or a lot? Life will show. AMD 95bn roughly corresponds to less than 1% of GDP, and the announced improvement of the tax-to-GDP ratio by 0.7 percentage points will result in a loss of tax revenues by AMD 70-75bn,’ Aramyan pointed out./pp

Government measures are insufficient/pp

Aramyan reminded that the government envisages some measures, in particular, increasing the turnover tax, expanding the income declaration, but it is not enough to improve the tax-to-GDP ratio by 0.7 percentage points./pp ‘Moreover, I think that increasing this indicator even by 0.2 p.p. is too ambitious a task. We get seduced and forget that the 1 per cent improvement in 2023 was mostly driven by fantastically high income tax growth, especially for the financial and banking sector. Revenues were generated on which taxes are paid partly in 2022, partly in 2023,’ the former finance minister emphasised./pp

On the draft state budget for 2025/pp

The draft state budget for 2025 approved by the Armenian government at the end of September 2024 envisages revenues of 2 trillion 873 billion drams, expenditures - 3 trillion 482 billion drams. 482 billion drams, deficit - 609 billion drams. Economic growth is planned at 5.6%, average inflation at 3.5%, and the ratio of government debt to GDP at 53.5%. ($1 - 387.17 drams).-0-/p brp/p