The savour of Tbilisi’s debt26.07.2010 | 20:04
Today, only the blind and deaf may fail to know about Georgia being up to eyebrow in dept. Even National Bank has indirectly hinted at the coming default, having stated the figure of Georgia's aggregate debt of 8,6 billion dollars, which is 80,3% of the country's GDP. Georgia owes Russia 117,4 million and if the Russian side demands repayment of this money invested in construction of the new liberal economy Saakashvili will simply have to declare his country straining after Singaporization bankrupt.
International Monetary Fund, which is one of Georgia's primary creditors alongside with World Bank, many times advised the government to reduce the budget deficit. A reasonable warning, indeed, considering the fact that one day the money inflow will be over and Georgia will have to bear further risks of its happy future on its own.
The figures look the following way: World Bank lent Tbilisi 1,2 billion dollars; another 848 million dollars were provided by IMF, 184 million dollars by Asian Bank and 50 million dollars by European Union. Besides the mentioned tranches, Georgia obtained a small credit of 117,4 million from Russia.
Against this background, the money owed to Russia does not look that significant but the savour of it is that the international donor organizations will not venture to voice their right for refunding and Georgia will evidently obtain some veiled debt restructuring. Experts share an opinion that IMF and World Bank cannot perform restructuring simultaneously; however, this agreement may be made due to negotiations where these organizations will act as advisors, thus pushing the creditors towards the necessary decision.
And here Russia may lightly take the stage, being free and entitled to show generosity. Why has not the Russian side demanded the repayment of debt from Georgia?
- I believe Russia will not do anything that might aggravate the situation. No one will press upon Georgia except Russia if it complies with the minimum debt service conditions. But if the Russian side firmly demands the repayment it will put the republic in an utterly embarrassing position and the issue will be raised directly before admitting Russia to WTO where Georgia might hinder it. In this case, the following might happen: writing the debt off in exchange for entering in WTO and Georgia's withdrawal of all possible claims, - the current situation is commented by economic expert, member of Georgian Strategic and International Research Fund Vladimir Papava.
Georgia must have an asset of a bit more than 500 millions to grant a delay in payments but there is no such money and there will hardly be. Thus, Sakartvelo is a perfect candidate for economical decedents.
Of course, it is not yet time to erect a headstone but I suspect that World Bank and IMF feel sick at the thought of their money, which has been allocated to maintain Georgian economy, being spent by Saakashvili to pay other creditors.
- World Bank and IMF are financial institutions taking independent decisions as to the necessity and possibility of providing financial assistance to the countries having problems with debts. Neither IMF, nor World Bank has got a direct responsibility of extending new loans to problem countries. One should also remember that the world financial institutions have already provided Georgia with over 2 billion dollars. World Bank and IMF may grant new loans to Georgia only if it meets certain conditions set forth by financial institutions. As a rule, they concern budget policy stiffening and budget deficit reduction, - Vice President of NEOKON Expert Consulting Company Igor Savelyev explains.
Earlier, the mechanism of settling debts and disputes at the international level included harsher and, by the way, more effective methods. Today, according to the analysts, there is no alternative for debts restructuring; there is only the pragmatic and weighed decisions as to paying back what had been taken. Otherwise, it is default.