Armenian Financial Market: Key Developments (June 22-28)
YEREVAN, June 29 – The past week in Armenia’s financial market has been marked by significant developments across several key areas, including public debt, the banking sector, macroeconomic forecasts, interest rates, and currency dynamics. Decisions regarding non-cash payments also played a crucial role, influencing the overall financial landscape.
Public Debt: Armenia Aims to Reduce Debt-to-GDP Ratio to 45%
Armenian Deputy Minister of Finance, Avag Avanesyan, announced on June 26, during a business forum dedicated to the 20th anniversary of the Eurasian Development Bank (EDB), that the government aims to reduce the public debt-to-GDP ratio to 45% within approximately five years. This trajectory is crucial for banks and investors, as it impacts the valuation of government securities, the cost of borrowing, and fiscal stability. A reduction in the debt burden could create a more stable framework for debt servicing and liquidity management.
Banking Sector: Central Bank Sees No Grounds for ‘Excessive Profits’ Claims
Martin Galstyan, Chairman of the Central Bank of Armenia, stated on June 23 on Public Television that the notion of excessive profits in the banking system lacks convincing grounds. He emphasized that the profitability of Armenian banks is generally comparable to that of banking systems in other countries in the region. Galstyan noted that since 2022, banks have received an additional impetus due to capital inflows and servicing non-residents, which effectively led to an export of financial services. According to ARKA news agency’s ratings, the net profit of the Armenian banking system in 2025 amounted to 421.3 billion drams, an increase of 16.01%.
This statement is particularly relevant given ongoing discussions about the tax burden on the banking sector. Starting from January 1, 2027, it is proposed to increase the dividend tax rate paid by banks to individuals and organizations to 15%, from the current 5%.
Macroeconomics: Ministry of Finance Forecasts Medium-Term GDP Growth at 5.4-5.6%
Armenian Minister of Finance, Vahe Hovhannisyan, announced on June 25 at the EDB’s 20th-anniversary business forum that the government forecasts stable economic growth of 5.4-5.6% annually in the medium term. He highlighted that over the past five years, Armenia’s economy has grown by an average of 7.9% annually, with real GDP increasing by 7.1% in 2025.
For the financial market, these forecasts establish a baseline macroeconomic environment for lending, assessing debt stability, and evaluating demand for banking products. The relationship between economic growth, fiscal policy, and the quality of loan portfolios remains central for banks.
Interest Rates: Central Bank Considers Possible Reduction in Loan Rates
Loan interest rates in Armenia could decrease if favorable inflationary and geopolitical conditions persist, declared Martin Galstyan, Chairman of the Central Bank of Armenia, on June 23 on Public Television. He noted that the reduction in Armenia’s risk premium is already reflected in financial markets, with the difference in yields between Armenian and US government bonds becoming significantly lower than one or two years ago.
However, Galstyan emphasized that the cost of loans depends not only on the level of risk but also on the cost of resources that banks attract from depositors. Currently, banks pay an average of about 10% for dram deposits, while the average interest rate for consumer loans is around 17%, and for mortgage loans, it is about 13%.
For banks, this maintains the connection between the cost of the deposit base, the loan interest rate, and the margin. For borrowers, a reduction in interest rates may depend on the cheapening of attracted resources and the maintenance of stable inflationary and external conditions.
Currency Market: Dollar Stable, Euro and Ruble Decline
According to the Central Bank, the exchange rate of the US dollar against the Armenian dram remained almost unchanged during the week, moving from 368.07 drams on June 22 to 368.12 drams on June 26.
The euro exchange rate decreased from 421.59 to 417.23 drams on June 24, after which it partially recovered to 419.84 drams.
The ruble exchange rate against the dram showed a more pronounced decrease compared to the dollar and euro, falling from 4.9813 to 4.7383 drams.
For financial institutions, such dynamics underscore the importance of daily monitoring of currency positions and customer operations. For businesses, exchange rate parameters for import, export, and cross-border payments remain crucial.
Payments and Social Policy: Additional 10 Billion Dram for Pensioner Cashback Program
On June 24, the Armenian government decided to allocate an additional 10 billion drams from the 2026 state budget to the cashback program for pensioners using non-cash payments. From January 1, 2026, the cashback amount is 20% of non-cash expenses, but not more than 10,000 drams per month. In January-April 2026, the monthly increase in the number of beneficiaries of the program was 6.7%, and the average monthly increase in cashback per recipient in February-April was 3%.
For banks and payment infrastructure, the program maintains its significance as a tool for expanding non-cash operations among socially vulnerable groups. For the financial market, it can support increased operational activity and the involvement of pensioners in digital payment services.
Government Securities Market: International Investors Hold 7-8% of Dram Public Debt
Martin Galstyan, Chairman of the Central Bank of Armenia, announced on June 23 on Public Television that global institutional investors hold approximately 7-8% of Armenia’s public debt denominated in drams. According to him, the presence of international investors reflects attention to the Armenian market but also requires maintaining a responsible macroeconomic policy. Galstyan also noted that Armenia’s public debt is less than 50% of GDP.
For the capital market, this could signify an increased importance of dram-denominated government securities as an attractive instrument for external investors, and also strengthen the role of the domestic debt market in managing liquidity and investment portfolios.
Week’s Summary
The week recorded the financial market’s adaptation to current macroeconomic parameters. Debt stability, funding costs, deposit interest rates, international investor participation in dram-denominated public debt, and currency market dynamics remained in focus. Simultaneously, decisions regarding the cashback program highlighted the continued role of non-cash payments in social and financial policy.
Source: https://armbanks.am/hy/2026/06/29/275494/
