Armenia to cut defence spending by 15% in 2026

Armenia plans to allocate 560 billion drams ($1.44 billion) for defence in 2026, down 100 billion drams ($258 million), or about 15%, from 2025, according to the draft state budget approved by the government on Wednesday.

The reduction marks the first decline in military spending since the 2020 war with Azerbaijan. Defence outlays had risen steadily from 306 billion drams ($608 million) in 2021 to 661 billion drams ($1.69 billion) in 2025, making the sector the fastest-growing item in the budget. Even after the cut, spending in 2026 will remain higher than in any year before 2024.

The government’s decision comes weeks after Armenia, Azerbaijan, and the United States initiated a peace declaration in Washington, D.C., on August 8. Prime Minister Nikol Pashinyan and the finance minister signalled at the time that a peace track could ease the pressure for higher military spending.

“I think in the 2026 state budget, there will either be no major increase in defence spending or none at all. That is logical. At least for now, that is our assessment. We will continue our operational analysis of the situation,” Pashinyan said on Aug. 21.

At a parliamentary session on September 10, he explained that the sharp rise in 2025 had been linked to urgent needs, including the prepayment of defense-related loans. “Some of the funds were directed to repay obligations that otherwise would have been due in 2030 or 2035. We found it appropriate to reduce future debt burdens, but not only that,” Pashinyan said, adding that under the medium-term expenditure framework, 2026 still represents normal growth compared with 2024.

According to the budget plan, state revenues in 2026 are projected at 3.91 trillion drams ($10.16 billion), including 2.97 trillion drams ($7.72 billion) in tax revenues. The deficit is expected at 537 billion drams ($1.39 billion), or 4.5% of GDP, down from 5.5% this year.

Finance Minister Vahe Hovhannisyan told the cabinet that the government’s debt-to-GDP ratio is forecast at 53.5% by the end of 2026.

Funds allocated from the state budget for the defence of the RA
Infogram

Eduard Arakelyan, a military expert at the Yerevan-based Regional Center for Democracy and Security, said reducing defence spending while Armenia’s armed forces remain in the early stages of reform could be risky. “Each cut or freeze of programs carries the risk of rolling reforms back by years,” he said, pointing to gaps in basic equipment, officer training, and logistics.

He noted that while Yerevan is pursuing a peace agenda, Azerbaijan is moving in the opposite direction, expanding its military budget to about $5 billion in 2026 – three times larger than Armenia’s. Baku has been acquiring advanced drones, artillery, and aircraft and expanding its special forces. “This contrast increases the imbalance and risks for Armenia,” Arakelyan said.