PM presents anti-crisis budget for 2020
By Natalia Kochiashvili
Wednesday, June 10
The Government of Georgia has presented a draft anti-crisis budget for 2020 on 9th of June, before sending it to the Parliament of Georgia later yesterday. It was prepared by the Ministry of Finance due to the economic crisis caused by the Coronavirus pandemic.
According to the Prime Minister Giorgi Gakharia, the parameters of the anti-crisis budget have been agreed with the International Monetary Fund.
With these settings economic growth will be -4%; GEL1.8 billion will be deducted from the budget revenue; Current and capital expenditures will be reduced by about GEL600 million; The budget projection deficit will increase from 2.5% to around 8.5%; The current account deficit will shrink to 10.3% of GDP; Exports will decrease by more than 6%; Tourism and remittances will be reduced significantly; Consolidated budget tax revenues will be reduced by more than GEL1.5 billion.
According to Gakharia, the anti-crisis budget has nothing to do with the post-crisis plan, which the government is working with local and international experts to restore the economy in 2021-2023.
The PM says the biggest problem of the economic crisis is unpredictability, and this challenge is even more severe for Georgia’s open and small economy.
“In 2020, consolidated budget revenues (excluding debt and donor grants) were planned at GEL13.70 billion. Because of the pandemic, the loss of revenue amounts to just GEL1.81 billion,” reads the budget.
As announced, GEL3.4 billion will be mobilised for the anti-crisis plan. Additional resources mobilised in the budget to prevent the pandemic and its consequences amount to GEL5.63 billion, which includes credits allocated by the international partners (4.47 billion GEL): EU grant - GEL330 million; StopCoV foundation - GEL133.5 million; Interest receivable as a result of placing additional mobilised resources on deposits - GEL53.5 million; Increase in domestic debt - GEL650 million.
According to Natia Turnava, Minister of Economy and Sustainable Development of Georgia, more than GEL600 million has been saved in the anti-crisis budget to mobilize financial resources, which also affected part of wages.
According to the Minister, the public sector has been reduced by GEL60 million in terms of wages, which she calls ‘tightening govt’s belts.’ She said that besides the urgent need trips, business trips will not be funded, entertainment or sports events planned until now will be postponed, and so on.
The Minister said at a briefing after the end of the Coordination Council that the budget has been adjusted to the country’s anti-crisis needs. She expressed hope that the anti-crisis budget will be approved in the near future. A few days ago, the government submitted a revised version of the budget to parliament. Discussion of the document has not yet begun in the legislature.
According to the budget, primary current expenditures have reduced by GEL199.6 million, while capital expenditures were reduced by GEL347.5 million.
On the other hand, primary current expenditures for the pandemic increases by GEL1.87 billion; capital expenditures - by GEL123.8 million; Debt service and repayment increases by GEL42 million.
As a result state budget allocations increase by a total of GEL1.49 billion and amount to GEL15.92 billion.
Gakharia said that the government is working with international partners and predicts Georgia will be one of the first countries that will be able to recover.
The government of Georgia will take a new loan worth GEL4.47 billion to handle the crisis caused by the coronavirus pandemic, according to the anti-crisis budget for 2020.
The increase in the deficit is directly related to the increase in government debt. According to the current forecast, by the end of this year, the volume of debt will approach 55 % of the GDP.
According to the budget, it is necessary to gradually reduce the government's debt in the coming years and to return to the pre-crisis parameters as soon as possible.
“In order to achieve this goal, the borrowing rate will be significantly reduced from 2021, and therefore the volume of debt in relation to GDP will be partially reduced next year,” reads the budget.
Georgia's Deputy Finance Minister Giorgi Kakauridze says Georgia's economy has shrunk by more than 16% as of April due to the pandemic.
"Of course, this will be reflected in the annual rate," said the Deputy Minister, adding that the country's economy will shrink by 4 % this year.
He said the country's economic growth in 2019 exceeded the planned rate and was 5.1% instead of 4.5%. Kakauridze also noted that a similar trend continued in January this year and exceeded 5%.
