Georgia’s possible “loan trap”

Georgia was promised USD 4.5 billion at the donor’s conference. Of this amount USD 2 billion is in the form of loans which sooner or later Georgia will have to repay. Thus Georgia’s foreign loan repayment commitments will increase twofold. The Georgian authorities state that the country will not fall into the “loan trap” because these are soft loans and in some cases the country has 40 years in which to start repaying them.

Currently Georgia’s foreign debt is 16% of GDP. In three years time it is not predicted to be more than 20% of GDP. By 2013 Georgia’s foreign debt will reach its peak but not exceed 35%. In the Shevardnadze period, foreign debt was equal to 50% of the country’s GDP.