Strange occurrences in state budget

Eka Qarosanidze

One the one hand, 88 million GEL deficit was announced in the first-quarter budget and on the other, we are increasing aggregate budgetary indicator by 312 million GEL.

Alchemy or new system of budgeting in Georgian reality
What and why are we changing?
Budget is being increased by GEL 213 million. According to preliminary scheme, budget assignations were defined in amount of 6 billion 272 million GEL. This means that budget expenditure for 2009 will be decreased by GEL 1 billion compared to 2008.
Government representatives declare that budget must have two basic functions of economic stimulation and social function. The expenditures are planned to be increased in these two directions. Budget of public health service will be increased by 35 million GEL, 21 million will be assigned to the program of pension increase; Agriculture financing will be increased by 25 million GEL. Moreover, projects of tourism development will receive additional financing.
Eighty-eight million GEL deficit was announced in the first quarter of 2009 (deficit calculation implies expenses of both current and financial and non-financial assets as well). The amount is GEL 116.4 million less than the planned volume. The reason of budget execution indicator discrepancy with the planned one was excessive mobilization of budget revenue, which exceeded the planned volume in every category of the revenue.
The volume of grants received in an accounting period exceeded the planned volume by 9.6%, while other revenues exceeded the planned one by 7.6%. The major part of it is derived from the income gained by the realization of goods and services as well as by imposing sanction on income. As regards tax revenues, their correlation with the planned one slightly exceeds 1.
Pro forma indices of state budget of January-March 2009 was defined in amount of 1172.5 million GEL that is 21% of annual pro forma indices. In an accounting period 1 191.96 million GEL was mobilized that is almost 102% of pro forma indices.
The indices of January-March 2009 state budget revenue are the following:
Pro forma indicator of the taxes was defined in amount of GEL 1 087.3 million that is 23% of annual pro forma indicator. 1 099.6 million GEL was mobilized in an accounting period that is 101% of pro forma. The revenue gained from direct taxes exceeded the planned level by 1.5%, while the revenue from non-direct taxes that are more sensitive and obey the changes of domestic demand were accomplished by 100.9%.
The scheme showing the quota of taxes mobilized in state budget is the following:
From the realization of financial assets GEL 110.9 million has been mobilized that is 102% of pro forma indices (GEL 108.9 million) and 52% of annual pro forma.
GEL 23.6 million was mobilized from the realization non-financial assets that amounts 105% of pro forma indicator – GEL 22.4 million and 29% of annual pro forma indicator.
Only 93.8% of the planned expenses were spent by the state in the first quarter of 2009. The sharp deviation from the plan is made in the expenses for purchasing of goods and services (execution – 85.3%).
It should be noted that in the same period the budgetary expenses were increased by annual 3.5%, while the revenue decreased by 3%.
75% of the state budgetary expenses of the same period were covered by revenue from taxes, while the quota of privatization made up only 2 percents.
It is notable that expenses on social protection in the mentioned period made up GEL 292 million.
Second biggest category of state expenses in the first quarter of 2009 is general-purpose services (GEL 264 million) that were spent on the grants issued to local-governments, financing of financial and fiscal activities of executive and representative organs, together with national debt service expenses.
Expenses on public order and security in an accounting period made up GEL 221 million.
In the first quarter of 2009 aggregate public debt decreased by 1.2 percents (GEL 63 million) compared with 2008 and made up 5090.5 million GEL. Foreign debt has been decreased by 1.5% (GEL 55 million), while internal debt has been decreased by 0.6% (GEL 8 million). Effect from exchange rate changes amounts GEL 6.6 million.