Government will issue treasury liabilities

It looks like the Government is short of external credits and therefore in a hurry to take internal loans. It has finally been confirmed that the Government will start issuing treasury liabilities in August worth GEL 260 million. The Government will issue treasury liabilities which will be purchased by the commercial banks for a maximum term of 6 months at an interest rate to be determined at auction.

The Government assures its population that this step is being taken to stimulate the economy. It also promises that the income thus accrued will be used for developing infrastructure, although sceptical analysts suggest it might be used to meet budgetary liabilities.

Professor of Economy Nodar Khaduri, a member of Nino Burjanadze’s Democratic Movement –United Georgia, suggests that the idea of issuing treasury liabilities has been prompted by taxation revenues falling radically. The Government has serious liabilities to the population, and the Government is afraid that the political situation might become more tense and the budget will not be able to cover liabilities, thinks Khaduri.

There is yet another threat – that the money which the banks will spend on purchasing treasury liabilities will create problems for these banks, which are already not very happy issuing credits. This will cause an increase in credit interest rates and thus a further decrease of local investments. Maybe it would have been better for the state to reduce its expenditure without taking out extra loans, thinks Khaduri.