Sophico Sichinava

Due to our country’s warm relations with international financial institutions, there was no doubt that the agreement on the restructuring of Georgia’s external debts would be achieved even before the date of negotiations in government circles was fixed.

As some say,the hopes have come true, which is viewed as the government’s great success. But for the IMF’s renewed program financing, Georgia would face the real danger of default. The country has not been able to pay out the main part of the external debt since 2003 and in this period, its debt rose to 52 million dollars. This was an unreal amount for our small budget.
Negotiations were held with representatives of Armenia, Azerbaijan, China, Iran, Kazakhstan, Austria, Russia, Turkey, USA and Netherlands. Restructuring concerned payable amounts of 2003-2006 with the total sum of about 196 683 452 US dollars. It is noteworthy that the agreement with the “Paris Club” provides for the reduction of Georgia’s external debt service from 169,2 to 46 million dollars for the next two years. Georgia owes great sums to Turkmenistan with the current debt of 219 mln. dollars. Then there comes Russian Federation (156 mln. dollars). According to the state warranty, Georgia has received 45 mln. euro from Germany, 33 mln. US dolaars from the European Reconstruction and Development Bank. Zurab Nogaideli says, we got the conditions that were suitable to us – the interest terms have been preserved and agreement on better conditions, which we did not have before, has been achieved. In some cases, these are 4, in most cases ? 3 % annual interests, and it is one of the most important exclusions that the “Paris Club” made for Georgia.
According to the Finance Minister’s information, in case of need, Georgia’s creditor countries are ready to once again discuss the possible deferment of most part of Georgia’s external debt starting from 2007. Presently, Georgia’s external debt is 821 mln. 554 thousand dollars. Experts say, this will give Georgia a chance to pay out external debts gradually over the next two years. In this case, there is nothing we can do in this situation. A country should manage to repay the debts. The important thing is what conclusion we have drawn and how well we have learnt to deal and work with international financial institutions – take debts and then pay them out.
In spite of all, the amount of Georgia’s external debt gives less grounds for comfort. Moreover, if we take into account the fact that according to the standards of international financial institutions a country is in crisis when its external debt exceeds 30 percent of GDP. The indicator is more than 50 percent in Georgia. It is also a deplorable fact that the mentioned debt was accumulated due to the government’s weakness, absolute dilettantism and, perhaps, corruption.
Emzar Jgerenaia (chief editor of the Macro-Micro Economics journal, advisor of the minister of economics)
– “Today, great success has been achieved. The “Paris Club” has deferred payable amounts for 3 years. An unprecedented case took place ? old debts were also deferred. The new government of Georgia that has great enthusiasm, means and foreign support can implement significant reforms to put an end to the period of stagnation in Georgia and to use saved amounts for economic recovery. The important thing now is to have an exact schedule for making use of this period so that to avoid the problem. Yet, restructuring is a permanent, constant process which goes on all the time. Merely, once and for all it is necessary to work out a system of how and for what purposes debts should be taken and what effects each of them will have. Therefore, a country will acquire its face and learn to deal with donors. We will no more be in the role of beggars, but we will be a formed state that will, certainly, always have external debts and I see no problem in it, yet the ratio of debt interests to GDP should be at the admissible level.