The FINANCIAL — On 25 June 2016, on air on Rustavi 2, United National Movement member, Mikheil Machavariani, stated: “The amount of unpaid bank loans is GEL 355 million. This means that people are so impoverished that there is no money, there is no economy and their incomes have decreased.”
FactCheck took interest in the accuracy of the statement.
In unpaid loans, Mikheil Machavariani is referring to non-performing loans. As of 1 June 2016, the amount of non-performing loans was GEL 361 million whilst the GEL 355 million as mentioned by Mr Machavariani is the amount of non-performing loans registered in May 2016. At the end of 2012, the amount of non-performing loans was GEL 223 million. The growth in the volume of overdue loans can truly be considered as an indicator of negative trends in the economy.
To assess the problem in regard to overdue (non-perfotming) loans, we have to take into account the ratio of such loans in the total amount of loans in the country’s economy (see Graph 1) instead of taking the amount of overdue loans in absolute numbers (GEL millions). If the total amount of issued loans is on the rise, it is expected that the absolute amount of overdue loans will increase as well. This process itself is not an indicator of a problem if the ratio of overdue loans to total loans does not increase.
In the period of 2011-2016, the ratio of overdue loans in the total amount of loans fluctuated between 2% and 3% and showed a visible trend of decrease. Of note is that since the end of 2014, as a result of the GEL depreciation, the service of loans issued in a foreign currency became more expensive because most borrowers receive their income in the national currency. The above graph illustrates that the ratio of overdue loans increased in the case of loans denominated in a foreign currency. However, this difference did not cause a sharp rise in the total sum.
Mikheil Machavariani argues that the failure to meet loan obligations is because the incomes of the population have decreased. By the data of the National Statistics Office of Georgia, the average nominal salary and the GDP per capita have a tendency of growth.
Conclusion
FactCheck concludes that Mikheil Machavariani’s statement is MOSTLY FALSE.
