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Friday, 21 October 2016


Georgia compelled to seek investors on Mars

2010-11-02 17:55

9580.jpegThe Georgian government loves boasting of unseen economic growth rate in the country. At the same time the rest of state property is put on sale in a rather unnatural attempt of reducing the state debt that grows by leaps and bounds. In April 2008 Georgia issued bonds on London Stock Exchange, now the second issue is expected - to refinance previous Eurobonds. Now, inspired by excited interest to the first tranche of its long-term securities, Sakartvelo is ready for a second placement.


Presently the government is considering ways to push its 10-year Eurobonds to one of the world stock exchanges. "The details of European bonds issue will be determined early next year", - Nikoloz Mchedlishvili, Georgian PM's Spokesman reported.

Indeed, such things must not be done in a hurry. Placing the first Eurobond offering equal to USD 500 mln, Standard & Poor's and Fitch, international rating agencies, assigned similar sovereign credit ratings: "В+" and "ВВ-" accordingly. At that time the inspired government was glad to report that demand for Georgian bonds at the external markets had grown threefold and the coupon rate was 7.5%.

Naturally, among factors that guaranteed success of the first placement were liberal economic reforms and the country's immaculate credit history. Indeed, the history of Georgian debt can be included in any world economy manual under the title "Sovereign defaults and inefficient disbursement of funds". The first issuance of European bonds aimed at covering the state budget's deficit and settle arrears on other securities was not Georgia's only attempt to attract foreign investors.

In February 2009 the Bank of Georgia offered bonds for the amount of EUR 200 mln with 3 years' maturity. Last week New York Stock Exchange sold out bonds of Georgian Railway bonds offering help in placing "something else" that Sakartvelo government might want to sell.

 "A debt is a debt. No matter in what form the state has it. The success of the idea depends on the ability of the country's economy to service these debts. I know such operations can't be successful. We are accumulating debts now - we have gathered enough for one round and unfortunately, despite strong interest of the society, it is still unknown how USD 500 mln were spent. Now we are starting a second round, and our next generation will have to service these debts. The government is doing a very simple thing - putting off the moment of truth to the maximum. This is a typical financial pyramid that will lead to no good, of course", - Giya Khukhashvili, an expert for economic issues believes. 

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