“LUYS” Foundation has analyzed RA 2025. the state budget execution report.

Thus.

• In 2025, the economic growth rate of RA accelerated, making 7.1% compared to 5.9% of the previous year. The actual economic growth exceeded both the 5.1% forecast based on the state budget and the 2026 forecast. the revised 5.2% expectation based on the macroeconomic scenario underlying the state budget. Economic growth was mainly driven by high growth in services and construction. Other main branches of the economy also contributed positively to economic growth. However, the structure of economic growth continues to contain certain vulnerabilities, limiting the sustainability of growth. In particular, the high growth of construction was significantly due to the impact of the mortgage loan interest repayment program, and the industry structure maintained a high level of dependence on individual sub-sectors (for example, due to the activation of gold re-export, which although decreased compared to previous years).
• 2025 the performance of state budget revenues and especially tax revenues improved compared to the previous year, mainly due to higher than forecasted economic growth. The revenues of the state budget amounted to 2,886.5 billion drams, increasing by 11.9% compared to the previous year and ensuring 101.3% implementation of the specified plan, and tax revenues and state duties amounted to 2,725.2 billion drams, increasing by 14.0% and ensuring 100.3% implementation of the specified plan. The growth and overperformance of tax revenues was mainly due to the higher than forecasted economic growth, as well as the growth of the main types of taxes: value added tax, income tax and profit tax.Tax/GDP ratio in 2024 It improved from 23.3% to 24.0%, but it was significantly lower than the 25.0% level set in the budget, which shows that even in the conditions of high revenue growth, the full realization of the tax potential remains an important issue.

• Expenditures of the state budget were significantly under-executed, which means that part of the planned expenditures and programs were not implemented. 2025 state budget expenditures amounted to 3,305.3 billion drams, ensuring 95.8% performance against the specified plan. Capital expenditures were also underachieved, 89.6% performance was recorded. Underperformance of expenditures, especially capital expenditures, continues to be one of the important problems of state finances. From the point of view of the long-term growth of the economy and the efficiency of public investments, the full and timely execution of capital expenditures should be one of the important goals of the budget policy.
• 2025 the government debt/GDP ratio has decreased, but the debt service burden remains at a high level. Despite the increase in the absolute volume of debt, the government debt/GDP ratio decreased from 47.7% to 47.2%. The decrease in the debt/GDP ratio is a positive trend, but the debt service burden remains high, becoming a worrying factor. In particular, interest payments in 2025 made 349.1 billion drams or 10.6% of total expenses. The high level of interest payments is a problem in the sense that significant budget funds are directed to debt service, limiting the possibilities of using these funds in other priority directions, including capital investments and financing of social programs.

The full analysis is available at the following link:

 “LUYS” Foundation

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