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Saturday, 23 June 2018


Georgia under threat of an economic crisis

2008-11-17 09:29

1/7/1/71.jpegGeorgia risks falling into the abyss of economic crisis. Following lari's slump the Georgian experts repeat their cautions louder. The government keeps telling about the country's economy rosy prospects and ascertaining with joy that the crisis "hit" Russia exactly after the August war.

Until recently the local mass media - both TV and the press - have been silent about the domestic problems.


My friends and acquaintances that had heard a lot of the sorrowful state of the Russian economy would phone now and then suggesting that I should come back to Tbilisi, as the situation in the country was better. Recently they have been tireless in telling me about their family budget that is creaking at the seams - it has become hard to make both ends meet. It is noteworthy that the first signs of accelerating problems became vivid before the fall of lari rate at the end of last week.

This week long queues appeared at the exchange points in the Georgian capital. I get the information that local construction companies are freezing operations, the banks undergo reduction of staff.

The independent television company "Kavkasia" that has survived after the attacks against the oppositional mass media dedicated the live night to the economic problems. Leading experts were invited to the "Barrier" talk show. They were unanimous admitting that the 20% fall of lari, the rate that had been artificially maintained for several years - was another financial crime of the government. As the experts say it looks like somebody at the top has made hay of the currency jumps (volatility, scientifically speaking). Ex premier, ex minister of economy, ex chairman of the National Bank that formerly determined the economic policy of the country were beating the alarm "at the Barrier".

Ex minister of economy Vladimir Papava was boiling over: "The world practice considers the 7 percent devaluation of the national currency a catastrophe. Lari in Georgia lost 20 per cent at one bidding and they try to convince us that it's nothing at all serious!"

Ex chairman and the founder of the National Bank Nodar Javakhishvili was also resentful: "Somebody has made hay of the national currency fall and the people were reduced to poverty".

However these confessions are heard not only from the TV screen. Ex premier Zurab Nogaideli in the interview with one of the Georgian agencies predicts the impoverishment of the population: "Georgia's economy is entering a serious crisis. In the nearest future we will witness its various effects. The prices of practically all imported products have increased. It will most probably be the same with the energy resources: gas and electric power".

It is noteworthy that Georgia's government has announced another 18-month program against the August war after-effects. In 2009 "a gradual increase of minimum pensions up to 100 USD" is planned (currently the "merited repose" is secured by 40 conditional units). The teachers' salaries "will be increased by 50 laris at the first stage", socially unprotected population as well as the teachers, servicemen and the police will be provided with health care insurance.

To improve the economic background for business development it is planned to lower the salary tax rate from 25 to 15%. Besides other taxes on personal income and capital tax are subject to cancellation. The share of state in economy will be reduced: the volume of budget expenditure in relation to the gross domestic product will go down to 22 per cent.

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