The budget passed on Thursday commits the government to spending a record 2.6 trillion drams ($6.5 billion) while keeping the budget deficit at just over 3 percent of GDP. It envisages especially sharp rises in defense and capital expenditures.
In particular, the country’s defense budget is projected to reach 506 billion drams ($1.28 billion) in 2023. This represents a 46 percent increase over funding earmarked for the Armenian armed forces a year ago.
The government plans an even more drastic rise in funding for road construction and other infrastructure projects. It is due to total 557 billion drams.
These budgetary targets, dismissed as unrealistic by opposition lawmakers, are based on an economic growth rate of 7 percent projected by Prime Minister Nikol Pashinian’s cabinet.
Armenia’s economy is on course to grow by at least 11 percent this year on the back of soaring trade with and remittances from Russia. Local businesses appear to have taken advantage of Western economic sanctions against Moscow, with Armenian exports to Russia more than doubling in the first ten months of this year.
Economic activity in the South Caucasus nation has also been boosted by an increased number of Russian tourists as well as an influx of tens of thousands of other Russians who have left their country since the outbreak of the war in Ukraine.
Presenting the budget bill to the parliament earlier this week, Finance Minister Tigran Khachatrian acknowledged that maintaining this robust growth in 2023 will be an uphill task for the government. It has to “deepen ongoing reforms and overcome considerable difficulties” for this purpose, he said.