A shortfall in the state budget-who is responsible?
26 November, 2013
A shortfall in the state budget-who is responsible?
The state budget for this year may face a shortfall ranging from GEL 500 million to GEL1 billion if the current rate of revenue collection and state spending does not speed up its pace. Official statistics on state budget implementation in the first three quarters of this year imply that that revenue collection and state spending lag behind the planned figures by around 66% and 60% respectively; that hypothetically may lead to a shortfall by the end of this year.
According to Nino Evgenidze, Executive Director of the Economic Policy Research Center, if in the remaining three months the inflow of revenues does not increase, the state budget will have an approximatelyGEL 1 billion shortfall; if state spending does not increase, the deficit may amount to around half a billion in national currency.
In either case, the projection implies two ways out, economic analysts say: either sequester the budget or take a loan. But government refuses both, and insists that all budgetary programs - especially social obligations - will be implemented.
The governmental economic team believes that the budgetary problems are a result of the irresponsible economic policy carried out by the previous authority in 2004-2012, plus political uncertainty this year - dual power hurt the Georgian economy, starting with the parliamentary elections of the past fall (when Georgian Dream took office from the United National Movement, thoughMikheilSaakashvili, now head of the former ruling part, remained as a President until the recent Presidential elections on October 27, 2013), but things should get better, since this factor was removed after November 17, 2013, when the new president was inaugurated.
According to NodarKhaduri, Minister of Finances, government had to repay GEL 1.5 billion -sums paid in excess by business this year - whereas economic growth dropped from the 6% forecasted in the state budget to around 2-3%, and deflation fell to around 3.5%. In his interview with theKvirisPalitra newspaper,Khaduri admitted that there is around GEL 1 billion in free financial resources at the disposal of the state treasury, and state spending may even increase by the end of the year.
Evgenidze does not rule out that the revenue collection and statespending rate may really increase, since the last quarter of the year normally is the most active. However, she still believes that the optimistic planning of the state budget was overcooked.
”It was too socially oriented, and indicators were too optimistic. Government had to take into account the risk factors it speaks of now - that’s the government’s responsibility,” Evgenidze said to Georgian Journal.
Some economic analysts believe government, and the finance minister in particular, must bear responsibility and be dismissed if the state budget is not fulfilled this year. But Davit Aslanishvili, a Co-founder of Georgian Investment Group +, thinks dismissal is excessive. He agrees that the budget was slightly populist; however, he also shares the governmental view that the economic slowdown this year is a result of the irresponsible economic policy of the previous authority.
“This year was a victim of politics. Of course the economic team knew the 6% growth was not possible, but had they planned a lower figure political opponents would have made a noise about it, saying that the economy had been growing faster during the former government. This was not convenient before the presidential elections this year. In fact, the high economic growth that the previous government witnessed in the first part of its office-term in 2004-2007 was a result of economic reforms implemented during its predecessor’s – Shevardnadze’s - rule in the late 1990s. However Saakashvilis’s economic think-tanks - headed by KakhaBendukidze, who implemented pseudo-liberal economic reforms – undermined the Georgian economy completely, and this year’s slowdown is the repercussion of this policy,” Aslanishvili said, in an interview with GJ.
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