As part of its draft 2027 state budget, Armenia’s government has proposed to end a long-running social package for public sector employees and restrict funeral benefits. The government claims that the money saved will be used to increase the minimum pension by ֏1,000 ($2.50) per month.

The government approved the draft budget on Thursday. It will now go to parliament, where it is expected to be improved by mid-October.

The ‘social package’ programme was introduced over the course of 2012–2013 to compensate for low pay in the public sector. It allows employees to use allocated funds for services including resort stays, recreation, sports, and education.

During a press briefing on Thursday, Labour Minister Arsen Torosyan argued that the programme has served its purpose, claiming that  recent reforms have raised salaries so have made health insurance more affordable.

‘The time has come simply to end the provision of this service’, he said.

He added that those who have accumulated funds in their accounts under the programme will be able to use them for purposes set out in a separate government decision, but did not specify what these purposes would be.

In another change, the government also plans to stop paying the ‘funeral benefit’ to all groups starting from 2027. Under the current law, the benefit is ֏200,000 ($550) paid to the family members or those organising a funeral after a pensioner or relative of someone receiving state support dies. Torosyan said there had always been a question about whether the benefit was properly targeted. Now only people receiving social assistance will be eligible for the money

The saved funds, together with an additional ֏5.5 billion ($15 million), will go towards pension increases, the government claims. The minimum pension will rise by ֏1,000 ($2.50), from ֏46,000 ($127) to ֏47,000 ($129.50) a month.

The budget also cuts funding for poverty benefits and the care of elderly and disabled people. Simultaneously there are plans to increase the salaries of those working in the public sector by 18.6%.

Overall, the government is expected to spend around ֏4.1 trillion ($11.1 billion) in 2027, 12.2% more than in 2026. The government plans to borrow ֏468 billion ($1.3 billion) to cover the deficit. At the end of August, Armenia’s public debt was  $14.3 billion.

Defence spending is expected to rise by around 9.5%, while the health budget will increase by around 65%, mainly to finance the establishment of a universal health insurance system.

The government predicts that the economy will grow by 5.6% in 2026 and 5.8% in 2027, assuming that capital spending remains strong and the Amulsar gold mine starts operating.