Analysis of the 2024 State Budget

1.1. Overall Change in Budget Expenditures

Let’s consider Armenia’s 2024 state budget draft and programmatic changes.

Overall, the budget has grown twofold since 2018. In 2018, projected state budget expenditures amounted to 1.46 trillion drams, while in 2024, they will reach 3.02 trillion drams. The Republic of Armenia’s 2024 state budget deficit will be 340 billion drams, or 3.2 percent of GDP, as a result of which the debt-to-GDP ratio could reach 48.4 percent by the end of 2024.

It is worth noting that as of 2018, exports to the Russian Federation amounted to $667 million, and bank transfers made by individuals totaled $1,049 million. In comparison, for the 12-month period ending September 2023, exports to the Russian Federation reached $2,965 million, while bank transfers amounted to $4,282 million. Over these 6 years, budget expenditures have doubled, while exports to Russia have increased 4.4 times, and bank transfers by individuals have increased 4 times (More: Analysis of International Money Transfers).

Let’s delve deeper into the growth of Armenia’s budget plan over the last six years (see Figure 1). Armenia’s budget plan plays a pivotal role in the country’s development and outlines its direction.

• Starting from 2018, budget expenditures, amounting to 1,465 billion drams, have shown consistent growth.
• In 2019, a 12.5% increase was recorded, with budget expenditures reaching 1,648 billion drams.
• In 2020, the positive growth of planned budget expenditures continued at 12.6%, reaching 1,856 billion drams.
• 2021 was an exception in this chain of double-digit growth, with a -0.3% increase, totaling 1,851 billion drams. This was due to major challenges in the previous year, including economic stimulus measures related to the pandemic and the 44-day war in 2020.
• 2022 recorded an impressive 18.0% growth, resulting in planned expenditures of 2,184 billion drams.
• In 2023, budget expenditures grew by 18.6 percent, reaching 2,591 billion drams. The 2024 state budget draft is equally optimistic, with a 16.5 percent increase, setting budget expenditures at 3,017 billion drams.

Figure 1. Level of Dollarization in Armenia by Money Supply

1.2. Changes in the Largest Budget Expenditures from 2019-2024

In this section, we examine the most significant budget expenditures and notable changes in Armenia’s budget from 2019 to 2024. These figures not only reflect the country’s evolving priorities but also its response to economic, political, and social challenges.

1. Pension Provision and National Security.

The table shows that in 2019, the largest budget item was pension provision, accounting for 18.9% of the budget (312 billion drams), and the second was national security at 18.2% of the budget (301 billion drams). In 2024, national security ranks first, comprising 18.2% of the total budget (550 billion drams), while pension provision is second at 15.6% (471 billion drams). Overall, National Security expenditures have also doubled over these 6 years.

2. Newly Emerging Budgetary Priorities in 2024.

Two new major items in the 2024 budget deserve attention. Two new articles have emerged, forming a significant part of the 2024 budget plan. First, the article “Development of Policy in the Sphere of the Ministry of Internal Affairs, Government, Centralized Measures, Monitoring and Control” accounts for 2.9% of the budget. Additionally, the article “Establishment, Construction, and Improvement of Public Education and Preschool Institutions” has emerged, comprising 3.2% of the budget. Overall, these two articles are aimed at internal economic development and policy formulation.

These changes demonstrate Armenia’s response to new challenges and opportunities. It should be noted that the article “Development and Implementation of Government Policy in the Sphere of Foreign Affairs” has grown by 22.7 percent this year and constitutes 0.1 percent of the total budget draft, which is consistent with this year’s overall growth. In our opinion, it is more pertinent at this time to develop Armenia’s external economic and political interests than to develop policies for the Ministry of Internal Affairs and allocate 2.9 percent of the total budget to it.

Figure 2. Level of Dollarization in Armenia by Foreign Currency Demand Deposits and Loans

1.3. Major Budgetary Changes in 2024

Let’s also consider the expenditure items that have a significant share in the 2024 budget and have recorded the largest growth (see Table 1).

Table 1. Ratio of AMD and Foreign Currency Deposits to GDP

Author: Aghasi Tavadyan | tvyal.com | tavadyan.com | Source: minfin.am

The most notable here is the 41-fold increase in the “Development of Military-Industrial Complex” item compared to last year. 5.8 billion drams will be allocated to this direction, and this item will constitute 0.2 percent of the budget. The reserve fund has increased 2.6 times compared to the previous year, accounting for 3.1 percent of the budget, or 94 billion drams. Expenditures for agricultural modernization and knowledge-based, innovative economy (small and medium enterprises) items have increased 2.1 times compared to 2023. These two items respectively account for 0.8 and 0.7 percent of the budget. Tourism development has grown by 75.7 percent, amounting to 13.2 billion drams. The investment and export promotion program has increased by 48.6 percent, amounting to 7.7 billion drams.

The item “Implementation and Regulation of State Policy in Urban Development and Architecture” has increased 2.2 times. Following the loss of Artsakh, the item “Representation and Protection of RA Interests in International Courts, International Arbitrations, and Other International Instances, Ensuring Enforcement of Judgments and Decisions Rendered by Them” has also increased 2.1 times.

1.4. Discussion of this Topic in the Media

On November 2, I spoke on this topic on the 1in.am platform, where I discussed this and other economic issues in more detail.

Watch the interview:

English Summary

The 2024 draft state budget for Armenia reflects significant growth, with planned expenditures more than doubling since 2018, reaching 3.02 trillion drams. The budget projects a deficit of 340 billion drams, equivalent to 3.2% of the GDP, leading to a potential debt-to-GDP ratio of 48.4% by the end of 2024. Key changes over the past six years in budget expenditures highlight Armenia’s financial growth, and two new budget priorities for 2024 emphasize domestic economic development and policy-making, demonstrating the country’s adaptability in response to evolving challenges.

In 2019, the largest portions of the budget were allocated to pension security and national security. However, in 2024, national security takes the lead with a notable increase in funding. Additionally, two new budget articles focusing on policy development, management, and educational institutions signify Armenia’s commitment to addressing emerging challenges and opportunities. The 2024 budget also shows remarkable growth in areas like the military-industrial complex, reserve fund, agricultural modernization, and knowledge-building, reflecting Armenia’s strategic response to evolving financial and societal demands. The full analysis is available in the linked interview for a more in-depth discussion of these economic issues.