Georgia – world of sequester

By Mate Melia

The Y2000 Budget of Georgia has been implemented by 20% less than was approved a year ago. The results of the Y2001 made up 16%, however, the government confirmed two sequesters last year and the same we’re now alleging in the year to August.

We hope for the same to happen in November-December as it was in 2000.
The trade balance deficit in 2001 grew up considerably. Entire export comes on five groups of goods:
a) Soft industry products – 14.6%;
b) Scrap metal – 13.4%;
c) Coloured scrap metal – 2.8%;
d) Borjomi and alcoholic beverages – 12.9%;
e) Ore – 8.6%, flight device – 8.4%, aluminium products – 5.8%.
Totally, scrap metal export makes up 22% and 9% – on refitted Turkmen aeroplanes that is not the full export. Thereof, 40% of registered export has little to do with the production, which testifies to deep crisis in export production. As to import, it reaches 341 million US Dollars per month. 80 millions are fixed as non-taxable imports, 30 of which are investments, 40 million – grants and 10 the same. During the past six months, because of free circulation regime, 25% of these goods are non-taxable and another 25% – partially taxable (pharmaceutics). According to past six-month data, cigarette import decreased at considerably.
In this situation, despite the rising trend of successful budget implementation on June-July 2001, Municipality required 205 million Laries from the IMF for sequester. Besides, even the philosophy of budgeting is alleged and criticised much. The thing is that the authors, who draw the budget up, paid more attention to the grants and other external sources than domestic tax revenues.
This year in August Georgia was to accept:
– 145 millions from the World Bank;
– 12.5 millions of the structural transformation credit;
– Regular transfer of structural transformation credit – 40 millions;
– The third transfer – 40 millions;
– The first transfer of the fourth structural transformation credit – 40 millions.
Besides, the Georgian Budget should have derived 80 millions from the communications privatisation etc. None can imagine what the Y2002 Budget will rely on and which fields will take participation in implementation process? Georgia should change the philosophy of budgeting. One billion GEL are envisaged for the 2002 year budget, of which 90 comes from the tax revenue, the rest 10% from privatisation. As to external incomes, we may avoid them by using credits from the National Bank of Georgia. True, it may lead to the doubling of tax revenues, yet, the fiscal policy should provide for it, otherwise, in view of the existing tax fiscal policy, the Y2002 Budget will have to be sequestered three or four times.
The October 2001 cut will weaken today’s governmental mechanism still more and deepen the social crisis, as, according to official data, GDP grows by year (see the table #2, GDP Dynamic in 1998-2000, source; National Bank annual report, page 9) and the tax revenues decrease at the same pace (see the table #3, page 14).
For the next injections the World Bank required satisfaction of the IMF conditions, plus increase of energetic tariffs, coverage of last year indebtedness (wages, pensions) and total finance of the healthcare program. On the other side, the same IMF supports the idea of sequester that means that expenditures for such vital importance for country as Ministries for Internal Affairs, Defence, Safety, the Army of Georgia, and the entire Juridical Branch will be left without money, which, finally, will expand corruption more. This looks like Georgian tale about flea and ant, but with different ending that is not yet written..