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Scanty budget = aerial ambitions

05.10.2010  |  15:13

8423.jpegGeorgia will have to last on four billion dollars for a whole year - that's the amount the republic's costs must fit in. Tbilisi owes approximately the same amount to international creditors. Now Sakartvelo authorities are saying that the top priorities of the budget financing will be health care, economy, construction and social sphere. Will the declared means be enough for that?


Georgian state budget consideration by the parliament has been planned for today. The deputies are expected to discuss the possible reduction of the ministers' administrative costs. As the previous year, the money saved is planned to be spent on increasing the infrastructure projects financing. At the same time, the authorities believe that budget expenses should not exceed budget revenue by more than seven percent.

It's still unclear whether main financial document of the republic will include an item about settling the foreign debts that are almost equal to the country's costs - 3,6 billion dollars. As is known, last year, the authorities planned to give 100 million dollars back to international creditors but it looks like they decided to soften the issue of debts settlement.

Some of the Georgian economists, however, say that the country's foreign debt volume has not yet touched the critical limit. "The budget amounts to about 31-32 percent of GDP, - expert of the Center for Economic Research Shota Murgulia told Business-Georgia. - The critical limit will be reached when external liabilities exceed 50 percent of GDP".

In his turn, member of the Georgian Foundation for Strategic and International Research Vladimir Papava underlines that it is presently impossible to reduce the foreign debt volume so long as Georgia's export potential is not developed enough. "Import exceeds export four times, so today, the country has got no internal capabilities to reduce the foreign debt", - Papava said.

It looks like the next year we may only expect the growth of the foreign debt and, consequently, further decrease of GDP, which indicator reduced by almost four percent last year, though it tended to grow in 2008. There is a question, then: what tasks are planned to be completed by budget 2011?  The issue was discussed by GeorgiaTimes correspondent with Georgian economic expert Georgy Khukhashvili and his Russian colleague, expert of Institute of Strategic Assessment and Analysis Sergey Demidenko.

Khukhashvili: As a rule, neither country has got sufficient budget. On the other hand, today Georgia is facing serious social and economical risks and the funds deficit is going to be huge. Besides, the state budget project exists only on paper and needs to be realized. That's where problems are possible. As for the sum of four billion dollars, things are going to be hard here as well. In the context of serious inflation processes, those risks I have mentioned are going up, requiring the allocation of significant funds. I believe the discussion on the budget will be very intensive. 

Demidenko: To my mind, the amount of four million dollars is quite enough for Georgia. If we compare this budget to the budgets of some Central-Asian republics, the sum looks impressive. But if we compare it to Russia, Byelorussia and Ukraine, that's certainly nothing. Still, this is probably the sum that Georgia can afford to spend on reforms. All in all, the socio-economic situation in the republic remains rather complicated. It all depends on what the major share of the budget will be spent on, as well as on political will and economic wit in choosing priorities. If the state means are spent on military projects, there is no sense talking of any profound reforms. But if Georgian authorities manage to steer a middle course, then, perhaps, the situation will be improved in some branches. That's the matter of political management.

Can the budget be replenished by more material aid from the West and new investments?

Khukhashvili: Considering today's political environment, one should better not expect any large sponsorship. There will surely be some petty tranches but I wouldn't expect another oxygen bag as was given to Georgia in 2008. However, current investments cannot play the decisive role in completing the budget and the tasks faced by the government. Talking about investments, the situation is complicated here as well. There are political risks beside the social ones. These risks will grow, depending on both the external and internal factors. In general, the year will be difficult for Georgia. I leave open the possibility that it might be crucial for the republic. Moreover, I assume the peak of the economical crisis might also come next year.

Demidenko: It is yet unclear who will make investments into Georgian economy, for it is unclear what the payback will be in future. At the moment, Saakashvili is trying to place the stake on the tourism sector, so the basic efforts will be focused on that.


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