Armenia’s public debt is projected to rise to 6.45 trillion drams (US$17.83 billion) by the end of 2027, driven by a persistent state budget deficit where expenditures outpace tax revenues. The figure marks a steady upward trajectory from the 5.8 trillion drams ($16.03 billion) forecasted for the end of 2026, according to the government's newly unveiled draft state budget.

External Debt Growth Outpaces Domestic Borrowing

In a significant shift from previous fiscal cycles, Armenia's external debt is expected to grow at a faster rate next year than its domestic obligations. Estimates show external debt increasing by 14.2% in Armenian dram terms, compared to an 8.5% growth rate for domestic debt.

Despite the acceleration of foreign borrowing, the Ministry of Finance noted in its draft budget that domestic currency debt will remain at historically elevated levels. To balance this risk, the government plans to continue expanding cooperation with international financial institutions and introducing measures to sustain the bond market's attractiveness to foreign investors.

The cited metrics isolate government-held debt, as municipal debt remains negligible. Furthermore, these figures exclude the Central Bank’s external debt, which stood at $460 million as of August 2026 and is no longer calculated under the primary public debt umbrella.

Debt Servicing to Swallow 10% of State Budget in 2027

Armenia is scheduled to allocate a combined 988.4 billion drams ($2.73 billion) toward debt repayment and interest servicing in 2027. This total consists of 416.8 billion drams ($1.15 billion) in interest payments—up from roughly 369 billion drams ($1.02 billion) in 2026—and 571.6 billion drams ($1.58 billion) in principal repayments.

The 416.8 billion drams required strictly for interest will consume roughly 10% of total state expenditures and 11% of state revenues, exceeding the allocations of several major economic sectors. Most of these payments are directed toward domestic state treasury bonds. Conversely, foreign-currency sovereign Eurobonds will only require interest payments next year, as none are scheduled to reach maturity in 2027.

Debt-to-GDP Ratio Approaches Cautionary Thresholds

By December 31, 2027, the government debt-to-GDP ratio is projected to hit 47.4%, representing a minor 0.8 percentage point increase from the close of 2026. While the Ministry of Finance forecasts a slight stabilization and decline over the subsequent two years, the figures approach statutory boundaries.

Armenia’s fiscal rules establish tight operational limits at the 50% and 60% debt-to-GDP thresholds. Crossing these lines triggers mandatory spending cuts to restore fiscal equilibrium. The ratio last breached the 60% danger zone during the economic disruptions of 2020–2021 before being brought back under control.

(Note: Conversions are based on the current exchange rate of approximately 361.73 AMD per 1 USD).