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The 2014 State Budget Fulfillment May Fail

Several years ago the Georgian society used to associate the Georgian state budget with one unpleasant word – sequestration. Today another term – budget gap – has become relevant. In 2013 the state budget gap marked 640 million GEL. Economic experts do not rule out the 2014 budget fulfillment may also fail.

According to the last report, the state budget revenues in January to October marked 7.174 billion GEL, while the total budget plan accounts for 9.105 billion GEL. It is evident 100% fulfillment is questionable. That’s why our citizens argue whether the 2014 state budget fulfillment may fail. BPN.Ge has asked Paata Kvizhinadze, a head for the parliamentary committee for branch economy and economic policy, to make comments on the issue.

Paata Kvizhinadze: “I would not agree with these pessimistic expectations over the issue, because the revenues part is being fulfilled by surplus. There are unimportant problems with incomes part, but it will be also fulfilled by the end of the year. Even if this part fails, the gap will be unimportant. The problem is mostly related to the expenditures part, but I hope this problem will not bring catastrophic outcomes, because the implementation of infrastructural projects has evidently improved”.

 A report on the expenditures part will be introduced to the parliament in the near future, Kvizhinadze noted. Therefore, it is untimely to discuss the issue before the final results: “I believe the budget will not fail, but if the expenditures part fails, no serious problems will arise for our economy”, MP noted and added the GEL exchange rate fluctuations are related to the strengthened USD.

Analyst Demur Giorkhelidze assures there is no threat for the state budget failure:

-I receive information on the budget expenditures and revenues every day and I have found nothing catastrophic in these data. There is no threat the budget will fail or some programs will not be financed. Ministries have not spent even the planned expenditures because of lack of professionalism and organization skills. Seemingly, they have only now started spending the due expenditures part and the process has affected the GEL exchange rate too. At the same time, there are several factors that coincide with each other: the demand for USD grows, the end of the year is coming, investors withdraw money, our citizens got frightened and hurried to currency exchange booths – these factors are partly conditioned by the fact the unemployed budget expenditures are used at the end of the year and this makes negative affect on the currency exchange rate. Anyway, I find no threats the budget gap will be too serious.

Demur Giorkhelidze assures the national currency was artificially strengthened and it would be expedient if the National Bank of Georgia (NBG) starts gradual devaluation of the GEL rate. Naturally, this process should be affixed to the economy, he says. “They will not abandon GEL, but I expect the GEL exchange rate against USD will stop at 1.9 point and this tendency will be maintained in 2015”, Demur Giorkhelidze said.

Economic expert Levan Kalandadze also makes pessimistic forecasts like other specialists: “Some experts expect the state budget gap to mark 300 million GEL in late December. I would say this would be the best variant. I will explain why I think so: the budget plan for tax revenues has been fulfilled. The Revenues Service provides genuinely good job and there is no problem in this direction in 2014, but the budget revenues consist of not only  tax revenues, but also grants, credits and other incomes. Unfortunately, there is a serious gap in the credits part and this is an evident problem with management. The fact is that the Government fails to use credits planned at the beginning of the year. Therefore, the budget fails in the revenues part. This is one problem, but we also have the expenditures part with serious problems. Some state offices have fully employed the funds, but a number of Ministries, especially, the Infrastructure Ministry fails to use planned expenditures and we have got due outcomes”.

“It is easy to determine whether the budget will be fulfilled or not. We should just  look into reports that show the plan has been fulfilled in neither revenues nor expenditures part. Someone does not like to recognize this because of political context and they are indifferent to this reality. This is another issue. The treasury department report reads the plan has not been fulfilled in these directions. Therefore, the forecast for expected budget gap in 2014 is realistic and substantiated. I personally do not expect the 10-month gap will be replenished now. This is unrealistic”, Kalandadze noted.

The 2013 state budget was not fulfilled either, but no one has taken responsibility for that. No one is expected to bear responsibility for the 2014 state budget failure either, Levan Kalandadze says. “They are indifferent and they assure neither the GEL devaluation nor the inflation level bring threats. Today we have to choose either to fulfill the budget on the paper and make serious strike to the GEL exchange rate, or take the responsibility and say the budget was planned incorrectly, the plan was fulfilled incorrectly, investments were not drawn and that’s why we have budget gap. This recognition will enable us to somehow save the GEL exchange rate and preserve currency reserves. Regretfully, this is an issue of political responsibility, not economic, because the economy is based on accurate figures and data and it does not reconcile with similar mistakes”.