Page 33 - Caucasus Outlook 2025

development, focusing on roads, municipal enhancements, water supply improvements and educational facilities.
The Ministry of Economy is set to receive GEL947mn, with priorities including entrepreneurship, tourism, innovation and major infrastructure projects like power line construction and development of the Anaklia deep-sea port. Meanwhile, GEL3.12bn will go toward regional development and infrastructure, targeting over 100 settlements for construction and rehabilitation projects to enhance living conditions.
The Ministry of Environmental Protection and Agriculture will receive GEL808mn for programmes like food safety, viticulture, reclamation systems, and forestry management. Culture and sports funding will reach GEL298mn each, supporting cultural development, artistic institutions, and athlete welfare.
Defence and security spending surpasses GEL3.35bn, including a 10% salary increase for police and military personnel and GEL490mn for defence infrastructure. Civil service salaries will rise by 10%. GEL20mn will fund a new civil initiatives programme.
6.2 Budget and debt – Armenia
The state budget recorded a moderate deficit of 2.9% of GDP, which is slightly lower than the 3.1% registered in 2023. This reflects improved revenue collection and restrained expenditure growth. Total government revenues increased by 8.2% y/y, reaching AMD2.1 trillion ($2.8bn) by November. This growth was driven by higher tax revenues, particularly from value-added tax (VAT) and corporate income tax, which rose by 9.5% and 11.3% respectively. Public expenditure also increased, by 7.4%, with key allocations directed towards infrastructure, healthcare and education.
By the end of 2024, Armenia's public debt stood at AMD4.4 trillion, representing approximately 51.5% of GDP, a slight decline from 53% in 2023. External debt accounted for 60% of the total, with major creditors including multilateral institutions such as the World Bank, IMF and the Eurasian Development Bank (EDB). The costs of debt servicing remained within manageable limits, representing 8.4% of total revenues. This was aided by favourable terms on external borrowing and the appreciation of the dram, which reduced the local currency burden of foreign-denominated debt.
To enhance fiscal resilience, the government implemented measures to broaden the tax base and combat tax evasion, resulting in a 5.7% increase in the tax-to-GDP ratio. These measures, in conjunction with enhanced public financial management systems, have reinforced the country's fiscal sustainability. In order to stimulate economic activity,
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