Georgia’s foreign loans and the threats they pose

Recently Georgia’s foreign debt has increased dramatically and very quickly. Government members think it comprises a bit more than 30% of GDP, and is therefore not going to be a problem. However some analysts are sceptical about this. Professor Lado Papava thinks that the structure of paying back the loans is a matter of concern. He highlights that in 2013 Georgia will have to pay back half a billion USD, the money was used for issuing eurobonds when Lado Gurgenidze was PM.(Today he is a co owner of the Peoples’ Bank renamed as Liberty Bank)

Many people are asking where this money went. However before an answer is found Georgia will have to repay these loans and Papava states that it is very difficult to pay half a billion USD with annual interest of 7.5%, which could bump the figure up to almost 800-900 million GEL, and over a billion if the lari rate falls further. He suggest that most probably the Government will take on extra foreign debts in 2013 to pay off the existing debts.

The soft loan Georgia took in 2008 for 10 years also has to be paid back in 2018. “We have to start paying back this loan in addition to the Gurgenidze loan," says Papava, highlighting that the repayment structure is dangerous for the country.