Draft State Budget 2013 To Be Changed
18 October, 2012
Draft State Budget 2013 To Be Changed

The state budget project of 2013 drafted by the ex-government will be changed to be tailored to the new government priorities. The social obligations on pension increase and health-care will be kept but the new government plans no enhancement of the state debt as well as 2% drop in the income tax built in the draft paper at the moment. Instead the new government offers different, more social-oriented preference in the income tax.  

Before official retirement, the ex-government submitted draft

project of the main fiscal document of the country for 2013 to the Parliament. The paper retains the persistent defects of almost all state budgets [of the Rose-government] such as non-transparency and lack of detailed description of budgetary revenues and outlays, Davit Narmania, a candidate for the post of Minister of Infrastructure and Development, said in his draft budget analysis when he was still Director Executive of Caucasus Institute for Economic and Social Research.

The forecast of the budget makes GEL 8.535 billion. The revenue forecast stands at GEL 7.234 billion that by GEL 442 million exceeds the similar figure planned this year. Tax incomes traditionally make the lion’s share in this data: the prognosis for tax revenue stands at GEL 6.8 billion that covers 94% of the entire revenue forecast and makes 23 % of GDP.  The draft fiscal document forecast 6% of economic growth next year and remains loyal to the Act of Economic Freedom focused on reduction budgetary expenses against the GDP: the share of budgetary deficit drops from 3.5% to 2.8% against the GDP and the share of the state debt shrinks by 3.7% [from 36.5% of GDP to 32.8%]. The draft paper also envisages 2% drop of the tax income from 20% to 18% in pursuance with the tax legislation [that aims at reduction the tax income to 15% ultimately].

The draft budget priorities keep close with the pre-election promises of the ex-ruling party National Movement. Accents fall on social and health-care, education and agriculture: the social-and-healthcare expenses increase by 29.3% to GEL 2.339.5 million and almost half of it comes on financing social care and pensions targeted at USD 100 equivalent to about GEL 160 in national currency. The social expenses include insurance of 3 million people as well as GEL 1000 vouchers per family [during coming 4 years].

Financing on agriculture increase by 22.4% and makes GEL 182.280 million that falls much behind a billion-promise pledged by Nationals to spend each year [on agriculture] within 4 years. Financing to education increased by 6.5%.

The new government agrees with the general macro-economic data of the drafted budget as the indicators are agreed with the International Monetary Fund (IMF) however they skip commenting details until the newly elected parliament will discuss the said paper.

As Davit Onoporishvili, a candidate for the post of Head of Finance and Budget Committee at Parliament, explained to Georgian Journal, the paper is supposed to go through changes after the first hearing and financing details will change for sure so as to be tailored on Georgian Dream’s [the winning political party] rather than National Movement’s priorities. What Onoprishvili can say for sure at the moment is the social-expenses [including health-insurance of 3 million people] will not change and the new government will do its best to stick to 3% cap of budgetary deficit without taking new state loans.

“The expenditure part will be increased so as to be based on Georgian Dream’s promises but details of the budget will be clear when the finance ministry revises the paper after the first parliamentary hearing,” He said.

Narmania questions the 6% growth of GDP as far as based on the draft budget total incomes increase only by 2.5% and lags behind the increase rate of outlays totaling 4.9%. The draft paper envisages taking GEL 816 of state debt consisting of GEL 716 million of foreign and GEL 100 million of local debts to finance deficit. Narmania believes the state debt is already burdensome as 10.5% of budgetary incomes are earmarked on the state-debt clearance in 2013 and its enhancement is not recommended.

Nodar Khaduri, a candidate for the post of finance minister, elaborates that the GEL 1000 vouchers as well as construction of Lazika [a new city initiated by the President Mikheil Saakashvili past year] will be canceled. Instead financing of agriculture will increase to billion and the pensions will equivalent to the subsistence minimum that more-less keeps close to National’s promise.

“The subsistence minimum is based on the consumer basket that makes GEL 150 at the moment per month, but this basket content should also be revised and it most probably will exceed GEL 160, however until this change we shall insure decent subsistence of our citizens,” Khaduri said in the interview to GJ.

According to him, the income tax will not drop by 2% but offers other more social-oriented preference: the subsistence minimum [equivalent sum] in the income tax will be exempted from taxation that will be a relief to much broader target group with salaries around GEL 500 [per month]. Shota Murghulia, an economic analyst with the Center for Strategic Research and Development, agrees.

“Such preference equals to almost 12% taxation [instead of fixed 20% of income tax] to people with around GEL 500 salaries and lower that is the biggest share in our society. It will be less tangible to high-paid people who get over GEL 1000 but the income tax will be less than 20% at any rate thanks to this preference,” he said.

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