IMPORTANCE OF REGULATING BUDGET RELATIONS THROUGH THE TRANSITING GEORGIAN ECONOMY (RESUME)

By Dr. Tamaz Maglakelidze

In each civilised country government takes the responsibility of providing certain economic independence for different territorial parts. It’s the measure of state policy that, in Georgia being through the process of new economic system formation, is chosen as prior among all others.

Relations between central and local budgets are based on distribution of rights and responsibilities among each governmental body, which is expressed in budget federalism.
There are two – decentralised and cooperative patterns of budget federalism. The first one is characterised with specifications as follows:
1. Macroeconomic stabilisation coming up from three important functions of governmental bodies (stabilisation function), distribution of national incomes (distribution function), and allocation of public product (allocation function). The first and second functions are those of central governmental bodies and the third one is shared by all of the three levels;
2. Distribution of tax rights among different governmental bodies.
The second – cooperative pattern is characterised with:
1. Higher participation of regional government in allocation of national incomes and macroeconomic stabilisation;
2. Progression of participation by regional government in the system of tax revenues distribution.
Formation of budget federalism in Georgia is brought too hardly. There is no budget code that would be basis for relations between central and local budgets. Budget of each level has lost an investment function and acquired that of consumption only. Misbalance of budget relations deepens at both, vertical and horizontal sights. Means of domestic investment policy management are, practically, eliminated and country remains under influence of foreign credit policy.
Overtaking the budget crisis can not be resembled to the creation of budget free of deficit. Budget deficit is agreeable in bounds of 20-30%. Important is, first, to control the borders of gap and the second, to allocate the budget lack not for consumption purposes, but for those of investment.
For the perfect regulation of relations between central and local budgets important is: to strengthen the rights of both expenditure and income parts on each level of government; to regulate the propriety relations between different governmental levels for the end of suppressing the crimes with property ownership, consumption and management in view; to stimulate the activity as well as investment purposes; to provide the differentiated policy in accordance with distinct regions; to pay the special attention to depressive regions; to regulate the economic relations between regions; to increase the responsibility of central government concerning social-economic development of regions; to overtake the problem of vertical and horizontal misbalance of budget system etc.
Development of budget federalism has to be the foremost country provides for an improvement of economic policy. It will considerably push up the liquidation process of territorial disproportion and optimal concordance of interests by each governmental body.