Transparency International calls for postponing increase of pensions before 2020 election

The NGO, Transparency International published a detailed overview of the 2020 budget presented by the Government. According to the organization some of the decisions made in the process of distributing the budget are problematic or unrealistic.

Transparency International suggests that the government should plan the budget around more realistic statistics, considering the stricter monetary policy, as well as decreased foreign direct investments. According to the 2020 budget, the budget will increase by 1.2 billion GEL, out of which 675 GEL will be directed towards tax revenue, and more than 570 billion toward taking out a government loan.

“The government should take into account the requirements of the strategic documents it has adopted and should think about reducing public debt, instead of raising debt,” states the organization

Transparency International also states that the 5% increase in economy, as written in the budget plan is quite “optimistic”, considering the current state of Georgian Lari and the possible yearly inflation of 3%.

In 2020, the Georgian government will borrow up to 2.8 billion GEL, but at the same time spend up to 1 billion GEL on debt service. As a result, government debt will increase by 1 757 million GEL, of which 856 million will be domestic debt and 901 million will be foreign debt. At the end of 2020, public debt will reach GEL 22.7 billion, or 46.8% of projected GDP. As of September 30th of this year, the state debt of Georgia is 20.2 billion GEL, which is 46.2% of GDP.

Up to 80% of Georgia's public debt comes from foreign debt. Therefore, in the event of a fall in the GEL rate, the GEL's external debt and its ratio to GDP (which indicates the debt burden on the economy) will increase. Therefore, the depreciation of the GEL is one of the important risk factors.

According to the Transparency International, along with the depreciation of the GEL, the increase in debt is caused by the increased budget deficit. “The government is not able to plan the budget in a way that makes reduction of the government debt one of its goals”- states the report. According to the socio-economic development strategy adopted by the Georgian government in 2013 (Georgia 2020), by 2020 Georgia's state debt should have been less than 40% of GDP. According to the Government Debt Management Strategy for 2019-2021, approved by the Ministry of Finance this year, government debt should be 41.4% of GDP in 2019 and 41.5% of GDP in 2020. According to the draft budget of 2020, the government debt will be 44.3% of GDP by the end of 2019 and 45% of GDP by the end of 2020.

The NGO suggests that to increase the effectiveness of the budget spending, stricter control over proper budgeting is needed. Particular attention should be paid to the proper selection of performance evaluation indicators;

“Expected results and indicators of the programs specified in the budget should become part of the main text of the law on budget.”- says the report.

Transparency International also states that there are problems with the 2020 project budgeting too. Some, including high-budget programs, are poorly designed. The consistency and interoperability of the objectives of the programs and subprograms, the final and intermediate results and the evaluation indicators are particularly problematic. “Some programs and subprograms are not intended to address the problem and therefore do not fit the purpose and purpose of software budgeting,” says the published report.

Report provides an example of the Ministry of Education, Science, Culture and Sport, which according to the NGO operates with outdated approaches and has only targeted funding for schools. “Improving the quality of education, which is the biggest challenge of school education, is not even a policy goal like in previous years. Despite a $ 163 million increase in funding for the school education program in 2020, the government is under no obligation to improve the quality of education,”says the report.

Another Indicator of the improper approach to the budget, according to Transparency International, is the fact that the budget for the programs, expected results and indicators are included in the appendix and there is still no separate text on budget law.

“For the last few years, one of the recommendations of the Georgia’s State Audit Office has been to make the expected results and indicators a part of the document law, which aims to strengthen the policy-oriented budget, instead of the current approach, in which the main objective of the budgetary policy plans and the performance of the funds is to fully utilize the allocated resources.”- states Transparency International.

One of the main messages of the published evaluation is that major changes before the parliamentary elections are not welcome, because these types of actions are perceived as using administrative resources for election campaigns and can greatly damage the overall character of the general election environment. This is in reference to the plan of the government to increase the state pension (by GEL 20-50), salaries of kindergarten employees (by GEL 100), teachers ( by GEL 150), police officers (GEL 125) and some doctors (GEL 100). In some cases, increases in pensions and salaries are expected from July 1 or September 1, which may be motivated by the October 2020 parliamentary elections -says the report.