Georgia’s Draft 2020 State Budget & Its Priorities
The draft 2020 state budget of Georgia reads that the 2020 expenditures will be GEL 14.2 billion ($4.82 billion) while the economic growth rate will be 5% next year. The expected USD/GEL exchange rate is predicted to be 2.95 and the annual inflation is set at 3%.
According to the draft already submitted by the government, the budget receipts will increase by GEL 1.2 billion ($407 million), of which GEL 675 million ($229 m) comes from tax revenues and GEL 570 million ($193.53 m) from public debt. The budget expenses will increase by GEL one billion, with the largest amount, GEL 451 million ($153.13 m), going to increased social spending.
Administrative expenses will increase by GEL 194 million ($65.87 m) and remuneration expenses will increase by GEL 91 million ($30.9 m). In total, the administrative expenses will be GEL 2.9 billion ($0.98 b). Moreover, 76% of the increased remuneration expense comes from three agencies: the Ministry of Internal Affairs, GEL 30 million ($10.19m), the Central Election Commission, GEL 20 million ($6.79m), and the Ministry of Defense at GEL 20 million ($6.79m).
Both the official and the traditional budget deficits are increasing next year. The negative gross balance will be 3.5% of the GDP and the traditional deficit will be 4% of the GDP.
Funding for the Universal Healthcare Program will not increase, with GEL 754 million ($256m) still allocated. However, this year's expenses show that the program will need additional funding of about GEL 40 million ($13.58m).
Employee numbers in budgetary organizations will increase by 111 persons. Also, there will be a significant change in the Ministry of Internal Affairs and the Ministry of Defense, with the number of employees in the Ministry of Internal Affairs increasing by 1,000, while the number of employees in the Ministry of Defense will decrease by 1,250.
In addition to this, from 2020, state pensions will be increased by GEL 20-50 and salaries of public kindergarten employees by GEL 100, teachers by GEL 150, police officers by GEL 125, and a number of doctors will receive GEL 100 more per month.
Non-governmental Organization Transparency International (TI) Georgia says that increases in pensions and salaries are expected from July 1 or September 1, which may be motivated by the October 2020 parliamentary elections.
The NGO added that compared to 2019, the budget operating balance will decrease by GEL 482 million, which is undesirable for sustainable long-term economic growth.
In 2020, the debt of the Government of Georgia will increase by GEL 1,757 million, of which GEL 856 million ($290.63 m) will be domestic debt and GEL 901 million ($305.91 m) will be foreign. At the end of 2020, the public debt will reach GEL 22.7 billion ($7.71b), which will be 46.8% of the projected GDP.
TI says that according to the Socio-Economic Development Strategy adopted by the government in 2013, Georgia's public debt should have been less than 40% of GDP by 2020 but it will likely be much higher. It also believes that in some cases, proper program budgeting remains a problem.
“Among large spending institutions, the programs and sub-programs in the field of education are particularly noteworthy. Although the low quality of education is one of the major problems in Georgia, the goal of the School Education program is not to improve the quality of education, nor to provide relevant progress indicators,” the NGO noted.
The organization also pointed out that the expected outputs and indicators of budget programs are still annexed and do not appear in the main text of the Law on 2020 State Budget.
“This shows that there is no appropriate approach to program budgeting. At present, the main purpose of budgetary policy is to execute the plans and fully utilize the allocated funds,” TI said.
The NGO also gave some recommendations regarding the draft budget 2020:
• The government should refrain from implementing projects such as increasing state pensions and the salaries of budgetary organizations in the months prior to the elections. “Such actions are perceived as a misuse of administration resources, which can significantly damage the electoral environment”;
• In light of tightened monetary policy and reduced FDI, it is better for the government to plan its budget at a more realistic economic growth rate;
• Government spending, budget deficits and increased public debt will have a negative impact on the GEL exchange rate and inflation. The government should think about reducing public debt, instead of raising it;
• Proper control over budgeting needs to be tightened to maximize cost-effectiveness. Particular attention should be paid to the proper selection of performance evaluation indicators.
By Tea Mariamidze
Image source: thestar.com