On February 1, 2025, Armenia will launch a state program aimed at bringing citizens with unrecoverable loans out of the shadow economy.
According to the Ministry of Labor and Social Affairs, the program will cover 218,000 citizens whose loans have been classified as unrecoverable for at least three years, provided the total principal debt does not exceed $2,540 (1 million drams).
Government analysis shows that only 19-20% of these debtors have formal employment, with most registered at wages below the minimum salary. Experts attribute this to workers negotiating lower official salaries with employers to avoid having up to 50% of their earnings withheld by enforcement services to repay their debts.
The program will allocate income tax from participants’ wages toward debt repayment over a maximum of 24 months. Additionally, participants will be exempted from fines and penalties on unpaid loans. Notably, 65% of potential participants are in the active working-age group of 25 to 50 years.
The government expects this initiative not only to help citizens escape the debt trap but also to reduce the shadow economy by encouraging formal employment.
