Long money poses non-transparency risks
01 May, 2014
Long money poses non-transparency risks
The so-called long money project launched this year by the Georgian authorities in order to provide the economy with long-term credits is swathed of non-transparency. The project is based on the emission of state Treasury Bills with a volume of GEL 200 million in 2014. Because only banks are allowed to participate in the securities auction in Georgia, banks will buy these state securities while the state will deposit the raised money at the purchaser banks under a single major
condition: the state deposits should be disbursed on long-term credits only. Also, banks are required to pay in deposits 1% higher rates than the interest the state pays them for T-Bills. Otherwise, the state gives the banks a loan under 1% whereas it does not restrict them to charge the targeted credits as high as they would like.
Minister of Finances Nodar Khaduri dubbed this intricate money-lending scheme as the “long money,” projected to ease the life of the money-deficient Georgian economy because banks shy away from long-term crediting for high risks. Sector pundits believe this intricate scheme will rather ease life of the banks than of the businesses because the banks are not restricted in how they dispose the money. Besides, Ministry of Finances (MoF) does not disclose any details on the controlling mechanism that should monitor whether or not the state deposits are spent on the targeted long-term credits. Neither is it going to elaborate on what sanctions are foreseen if the contracted banks break the promise and use the projected money at their own discretion.
“This mechanism offers a new instrument to banks to transform short-term resources into long-term ones. The state does not interfere in the commercial activity of banks,” MoF commented to Georgian Journal. “Inasmuch as a bank is a commercial organization oriented on profit, it is in its interest to disburse long-term credits to witness more incomes.” To other publications Khaduri reported that this is a commercial secret of banks. Analysts believe this kind of loose control and non-transparency unties the hands of the banks and they seem the obvious winners in the project: they secured 1% credits while they can disburse them as high as 12%-30% as they would normally charge business credits and enjoy a 12-30-fold higher profits correspondingly.
GEL 100 million has already been issued since this year that is equally divided on 2-year and 5-year T-Bills. The 2-year T-Bills raised GEL 43 912 100 under the interest of 6.8%; the 5-year T-Bills made 43 917 000 with the coupon rate of 10.073%, the MoF informs. 12 banks participated in the auction and a total of GEL 87 829 100 has already been deposited back to all the participating banks, however, their names are withheld under secrecy. All what is disclosed is that the banks pay 1% higher as projected or 7.8% and 11.073% for the 2-year and 5-year deposits respectively.
As GJ calculated from the already deposited GEL 87,829,100 the state receives around GEL 3 074 092 profit. As for the banks we can only conjecture the profit. If the banks disburse loans for instance at 12% they gain roughly GEL 5,524,169 or almost double of the state’s profit during the project period. On the other hand, instead of disbursing risky credits in Georgia banks may invest money abroad in more secured profitable projects and witness huge profits while the Georgian economy will remain as money-hungry as ever, analysts believe.
“I believe there is some corruption deal behind this queer long-money-scheme because details are closed and each side seems free from responsibility,” Ditrikh Muller, co-founder of Georgian Investment Group+, said. “It is too difficult to track down how the deposited money will be used.”
Soso Archvadze, an economic analyst cannot understand why the state acts like a corporation and keeps details in secrecy. “The state budget money circulation must be reported minutely to the public and no commercial secret can back up this non-transparency the MOF practices in this long money story,” he said. “Society must press the MOF on transparency from the very outset.”
Print
Other Stories
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
Georgia second among the fastest growing tourist destinations in Europe
Georgia is among the fastest growing tourist destinations in Europe. The data is published by the UN World Tourism Organization.
Bitmain launches world digital mining summit in Tbilisi, Georgia
Bitmain CEO Jihan Wu and Roger Ver, CEO of Bitcoin.com Head Speaker List featuring Circle, DEX.top and Genesis Mining when Digital Mining Leaders Convene In Tbilisi on September 21-23
GAZELLE FINANCE GEORGIA AND TBC BANK HELP THE WESTERN REGIONAL CENTER OF MODERN MEDICAL TECHNOLOGIES EXPAND ACCESS TO QUALITY HEALTHCARE SERVICES IN KUTAISI, GEORGIA
TBC Bank and Gazelle Finance have teamed-up to support Medical City, a leading healthcare provider in the western region of Georgia to launch the Western Regional Center Of Modern Medical Technologies.
Equivalent to buried treasure – resources that are underused in Georgia
For 2018 the IMF Commission has forecast an annual economic growth for the Georgian economy of about 5,5%.
Does the quality of Georgian wine increase and how the export affects it
If we look at the data collected about modern Georgian wine, we will find out that the Georgian wines produced between 2015-2017 are much better in terms of their quality and Oenologic features rather than the wines produced between 2009-2011.
Japan simplifies the visa requirements for Georgian citizens
Diplomatic and economic relations between Georgia and Japan are now moving to a new phase. Recently Japan has decided to simplify the visa requirements for Georgian citizens.
M&S (Marks and Spencer) and H&M collections to be produced in Georgia
Garments manufacturer MGMTEX will start production of the M&S and H&M trendy collections from this September.
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
16.11.2018
17.11.2018
USD
1
USD
2.6818
2.6727
EUR
1
EUR
3.0299
3.0268
GBP
1
GBP
3.4332
3.4240
RUB
100
RUB
4.0185
4.0447
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6727
EUR
1
EUR
3.0268
GBP
1
GBP
3.4240
RUB
100
RUB
4.0447
November 2018
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30