Georgia’s foreign debt increases

Georgia’s foreign debt is now nearly GEL 5 billion. If it continues increasing at its present rate it will soon be more than the entire state budget.

Foreign debts have increased the most in 2008, and the interest Georgia has to pay to service these debts has correspondingly increased. According to the Ministry of Finance the foreign debt at December 31 2008 was exactly GEL 4.486 billion. In December 2007 Georgia’s foreign debt was GEL 2.85 billion, so it has increased by GEL 1.636 billion over the last year.

Such a huge debt needs appropriate servicing. The 2009 state budget envisages around GEL 100 million for this. Independent experts are very pessimistic about these debts, saying that servicing and paying interest on debts is very painful for any country.

Economic expert Demur Giorkhelidze says that as the negative trade balance increases extra hard currency is needed to import the necessary products into the country. There is no direct source of this hard currency. The state policy does not promote local production and export, therefore Giorkhelidze predicts that in 2009 the foreign debt might increase even more.