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IMF putting Saakashvili on a diet

24.05.2011  |  12:34

IMF putting Saakashvili on a diet. 17418.jpegOne of Georgia's donors, International Monetary Fund (IMF), is foretelling an unhappy future to the republic. According to the Fund's forecast, Sakartvelo and some other countries in the region will have to pull in their belts so as to continue the process of getting out of the global economic crisis. Besides, in two years, Tbilisi will have to pay back almost one billion dollars to the international creditors. What can Georgian leader Mikhail Saakashvili, who seems to be obsessed with his own image, do in such a tough situation? GeorgiaTimes


correspondent discussed the matter with a famous Georgian economic expert Giorgy Khukhashvili.

Unpleasant news came from Washington for Mishiko. Deputy Director of IMF David Owen has stated that hard times are coming to the countries of the Caucasus and Central Asia. "Inflation growth is one of the major problems for the regional countries, - Voice of America is citing him. - In many countries, the inflation indicator currently reaches double figures. Inflation level is the highest in Kyrgyzstan - it exceeds 20 percent; Georgia has got 14 percent and Kazakhstan has got nearly 10 percent. Average inflation in the region is 11 percent".

Owen underlined that inflation in the regional countries mainly grows because of the increasing prices for food and energy resources and recommended the governments of the mentioned countries to form the expenditure policy considering the necessity of protecting the most vulnerable layers of society.

It is not quite clear how Georgia can reconstruct its shaking economic model in a short period of time. The republic is not abundant in natural resources and its government seems to have given up for good the development of a once successful industrial sector. However, David Own tried his best to reassure Saakashvili's team, which feels very nervous about the upcoming spring protest actions to be held by the opposition. "Georgia has reached significant economic success with no natural resources of its own, - he said.  - That's an encouraging sign demonstrating the country's capability to achieve economic success by "no-resource methods".

Perhaps, a sign in the form of corruption control at a low level encouraged Owen but what can be done with the "lame" banking sector of the republic, total unemployment, failing reforms in the state enterprises privatization and the actual absent of investments? IMF experts who have recently visited Sakartvelo recommended the local government not to put many hopes on the revival of a pre-crisis foreign investments flow in the republic. They also reminded that in the nearest years, Tbilisi will have to make significant payments for state debt service.

Nor experts, nor the opposition in Georgia are feeling optimistic. Dissentients are calling the authorities to account. In April, Free Democrats demanded that the Ministry of Finance accounted for the situation with the foreign debt. "In 2011, the foreign debt exceeded four billion dollars, while in 2008, it was less than two billion, - the oppositionists stated. - Everyone remembers very well the conditions, on which the Georgian government borrowed 500 million dollars in 2008, though the amount was not spent on the construction of a new gas reservoir as had been declared. No one has been responsible for this anti-state step, which has damaged the country, and no one knows what the money was spent on".  

GeorgiaTimes correspondent discussed IMF's unhappy forecasts and Sakartvelo's debt prospect with the Georgian economic expert Giorgy Khukhashvili. He said that he understands IMF's statement, which is related not only to the situation in the region. "The Fund has got enough problems: there are certain economic difficulties in the donor countries. IMF's forecasts are real, that's a quite natural scenario", - the expert remarked.

At the same time, our interlocutor assumes that from the point of view of the economic development, western donorship has not given Georgia much. "Yes, to some extent it decreased social risks but we cannot speak about any development. We've got other system problems that depend on the local government institutions, not on the institutional donorship", - he underlined.

Speaking about how the republic is going to repay its debt, Khukhashvili reminded that Georgia managed to postpone the debt partially by way of Eurobonds issuance. Moreover, the country has taken out a large long-term credit to cover this debt, so in two years it will have to repay not a billion dollars but a bit smaller sum. "Though it does not mean the problem is solved, - the expert believes. - It is still very urgent. The point is not the debts but the creditworthiness of the economy. If you are able to repay a credit then you can afford a credit but the Georgian economy is incapable of servicing any credits, even smaller ones. In the current conditions, it is impossible to solve any problems and social risks are already going off scale. I mean, that's not the best situation for the country".

Ruslan Chigoev

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