The FINANCIAL — Roman Gotsiridze: “The government announced that the spending part of the budget would be decreased by GEL 140 million. In reality, however, the budget stayed exactly the same.”
Given the depreciation of GEL and the decrease in economic growth forecasts, the Ministry of Finance of Georgia made a decision to review the 2015 state budget and lower its spending part. The Ministry of Finance of Georgia made an announcement about decreasing state spending at the end of February 2015 and presented the first version of the corrected budget in June 2015.
On the issue of the corrected state budget, the Chairman of the Centre for the Economic Development of Georgia, Roman Gotsiridze, stated that in reality the government did not decrease the budget but, rather, redistributed the money between various articles.
FactCheck looked into the accuracy of the aforementioned statement.
According to the corrected version of the 2015 state budget, the state revenue and payment plan increased from GEL 9,875 million to GEL 9,900 million whilst the state budget deficit decreased from GEL 1,191 million to GEL 1,165 million. Due to the decrease in the initial economic growth plan, the tax revenue plan of the 2015 state budget decreased by GEL 200 million; however, the overall revenues of the budget increased by GEL 25 million. The growth of revenues is mainly due to the drop in non-financial assets (privatisation) and the growth of the government debt. The revenues from privatisation increased by GEL 150 million (to GEL 235 million) as compared to the initial plan of the budget.
Despite the fact that according to the corrected version of the 2015 state budget the state’s internal debt dropped from GEL 600 million to GEL 500 million, the country’s external debt increased which increases the overall amount of the debt by GEL 14 million as compared to the initial version of the budget. The growth of the external debt is the result of the depreciation of GEL. At the beginning of the year the state budget was planned using the 1.8 exchange rate (GEL to USD) whilst the corrected version is planned using the 2.3 exchange rate.
As for the spending part of the budget, the corrected budget provides for the growth of spending to GEL 8,017 million. The growth of spending is mainly due to grants (transfers) and the increased expenditure for the interest on the loans. Capital (infrastructural) spending decreased the most, by GEL 79 million.
As for the allocations for state structures, according to the corrected version of the budget, these amount to GEL 9,575 million. Even though the funding of certain ministries decreased as compared to the initial version of the budget, the vacated money was spent on financing other budgetary organisations.
On 17 July 2015, the Parliament of Georgia adopted the changes to the Law on the State Budget at the third hearing. The new budget will be closer to reality as the initial version of the budget was planned for the 1.8 GEL to USD exchange rate and a 5% economic growth. However, the country’s main financial document (state budget) has not been corrected in a way so that it can play a positive role in the stability of the exchange rate of GEL. For this, the spending part of the budget had to have been decreased significantly.
Hence, FactCheck concludes that Roman Gotsiridze’s statement is TRUE.