YEREVAN, June 22. /ARКА/. The financial week in Armenia was marked by Central Bank decisions, discussions of public debt parameters, inflation dynamics, and institutional changes in the banking sector. The focus was on the refinancing rate, international reserves, capital inflows, foreign investor interest in dram assets, and new bank regulation mechanisms. Social and financial instruments, including reverse mortgages, also occupied a special place. For the market, the week marked a focus on macro-financial stability, regulatory quality, and the development of long-term financial mechanisms.
1. Public Debt: Authorities Set Goal to Reduce Debt Burden
Armenia plans to reduce public debt to below 45% of GDP in the coming years, RA Finance Minister Vahe Hovhannisyan announced in parliament. According to him, in 2025, the public debt-to-GDP ratio was 47.2%, a decrease of 0.5 percentage points, and the budget deficit was 3.7% of GDP, compared to the planned 5.5%. For the financial market, public debt parameters are one of the benchmarks for borrowing costs, fiscal sustainability, and sovereign risk assessment. Reducing debt servicing costs from 12.1% of budget revenues to 10% is designated as part of the fiscal agenda.
The practical significance for banks, investors, and issuers lies in maintaining focus on the quality of public finances, debt structure, and the impact of fiscal policy on the capital market.
2. Monetary Policy: The Central Bank Maintains Key Rate for the Fifth Consecutive Time
At its meeting on June 16, the Board of the Central Bank of Armenia left the refinancing rate unchanged for the fifth consecutive time, at 6.5%. The Lombard repo rate and the cash raising rate were also unchanged at 8% and 5%.
For the banking sector, maintaining the key rate anchors the current parameters of the cost of short-term liquidity and interest rate policy. Following a series of rate cuts from 10.75% in June 2023 to 6.5% in December 2025, the regulator is maintaining the rate at the same level.
For the market, this means maintaining the current interest rate environment for lending, deposits, and debt instruments.
3. Capital and Investors: The Central Bank noted an influx of funds into Armenian assets.
Armenia is seeing a significant capital inflow and growing interest from international investors, stated Martin Galstyan, Chairman of the Central Bank of Armenia. According to him, investors are showing interest in both dram-denominated government bonds and business projects.
For the capital market, this is due to the expansion of the investor base and growing demand for dram-denominated instruments. According to the Central Bank, foreign investment in Armenian dram-denominated government bonds has increased from 3.6 billion drams in 2018 to 177 billion drams in 2025.
The practical significance lies in the increased role of domestic debt instruments and the strengthening of the link between capital flows, the foreign exchange market, and demand for Armenian assets. 4. Inflation: Core Indicator Reaches 5%
Core inflation in Armenia rose to 5% year-on-year in May, exceeding the overall inflation rate, according to the World Bank’s Armenia Monthly Economic Update – June 2026. The WB also noted the continued upward trend in core inflation.
For the Central Bank and the banking sector, core inflation is a key indicator of persistent price pressures. This indicator is important for assessing interest rate policy, funding costs, and customer behavior regarding deposits and loans.
From a market perspective, this suggests the need for greater attention to inflation indicators when assessing interest rates, debt instruments, and the real returns on financial assets.
5. International Reserves: Exceed $5.7 Billion
Armenia’s international reserves have reached a record high, exceeding $5.7 billion, stated Armen Nurbekyan, Deputy Chairman of the Central Bank of Armenia. According to him, since the beginning of the year, the Central Bank has replenished its reserves by $1.1 billion.
For the foreign exchange market, the volume of reserves is an important element of macrofinancial stability and confidence in the country’s solvency. At the same time, the Central Bank previously announced that gold is no longer included in its updated reserve management strategy.
The practical significance of this decision stems from the need to strengthen the regulator’s reserve position and increase the financial system’s resilience to external payment and currency risks.
6. Banking Regulation: Bank Restructuring Mechanism Being Implemented
The National Assembly of Armenia adopted the law “On Bank Restructuring” and a package of related laws in the first reading. The bill provides for the introduction of a bank restructuring mechanism, with the exclusive authority to implement it vested in the Central Bank.
For the banking system, this signifies a transition from a model in which liquidation was the primary instrument in the event of a significant deterioration in a bank’s condition to a more flexible resolution regime.
The main instruments envisaged include the sale of the bank, the “bridge-bank” mechanism, the separation of problem assets, and other measures aimed at stabilizing the bank without liquidation.
The creation of a Restructuring Fund is also envisaged, funded by one-time, periodic, and additional contributions from commercial banks.
The market significance lies in the creation of an additional mechanism to protect financial stability and reduce systemic costs when working with problem banks.
7. Social Finance: Reverse Mortgages for Pensioners
The National Assembly of Armenia adopted in the first reading amendments to the Civil Code providing for the introduction of reverse mortgages and a new type of property rights for spouses. The bill introduces reverse mortgages as a new type of collateral and a reverse mortgage loan agreement.
For banks, this creates a new segment of long-term retail products related to real estate and regular payments to homeowners. The mechanism is intended primarily for pensioners – property owners who retain ownership rights and receive payments from the bank against the collateral. The practical significance lies in the expansion of the range of financial instruments for senior citizens and the emergence of an additional legal regime for spousal property relations.
Weekly Summary
The week demonstrated that Armenia’s financial market is in institutional adjustment mode. The macroeconomic agenda focused on public debt, the Central Bank interest rate, inflation, international reserves, and capital inflows.
The primary focus has shifted to the sustainability of public finances, monetary policy parameters, investor interest in dram assets, and new regulatory mechanisms for the banking sector.
The key areas of attention remain the debt burden, inflationary pressure, the Central Bank’s reserve position, the quality of banking regulation, and the development of long-term financial instruments for the population. investor interest in dram assets, and new regulatory mechanisms for the banking sector.
The key areas of attention remain the debt burden, inflationary pressure, the Central Bank’s reserve position, the quality of banking regulation, and the development of long-term financial instruments for the population.
