The Cabinet Reshuffles, but the Economic Team is Left Intact
08 May, 2015
The Cabinet Reshuffles, but the Economic Team is Left Intact
The Cabinet of Ministers of Georgia is undergoing reshuffling, with the currency crisis and economic slowdown in the backdrop. However, it seems that the ministers currently comprising the economic team will keep their posts. Prime Minster Irakli Gharibashvili, who has to name candidates for the new Cabinet, has already put the same old faces forward. This has angered both the opposition and a significant number of economic analysts, who think that the economic team should be changed first and foremost. They
argue that the currently active economic team has led the Georgian economy to stagnation and thus must be removed from the scene.

“The economy hasn’t been in such a poor state for 15 years now, and responsibility for it lies precisely on the economic team.”

“I strongly believe that replacing the current economic team needs to be at the top of the agenda. Otherwise, these Cabinet shuffles will be meaningless,” says Dietrich Muller, a financial and investment analyst, in an interview with Georgian Journal. “As a matter of fact, the economy hasn’t been in such a poor state for 15 years now, and responsibility for it lies precisely on the economic team. The national currency has depreciated by 30 percent since November of 2014. It is still going down, and the government is responsible for that. Yes, there were external shocks [that cut our exports, money transfers and investments] but these shocks were fairly predictable. The government had to react adequately, but it did not. If this inefficient team will keep their places in the new Cabinet, there is no reason to expect the economic situation to recover. The lari will most likely slip down from the current index of 2.3 GEL per 1 USD to 2.5 and even 3 GEL.
Demur Giorkhelidze, an economic analyst, is convinced that not only the economic team, but the entire government is responsible for the lamentable picture of Georgian economy.
“Impressive results could’ve been achieved within the last two years – if the government had been oriented towards results, that is,” he said. According to him, overall economic initiatives of the government weren’t that bad, but their implementation was wrong. For instance, the cheap loans program, which was aimed at boosting agriculture via preferential loans, failed to live up to expectations. The state is subsidizing the credit rates to beneficiaries, but the program itself is implemented by banks. This is a mistake, as both Giorkhelidze and Muller believe.
“In fact, this cheap loan program was far more profitable for the banking sector rather than to farmers. The reason is the false pseudo-liberal approach of the state not interfering with business. Therefore, the program is being implemented not by the state, but by commercial banks instead. This is a mistake, since this program carries state interests, yet it’s banks and not the state who choose who gets preferential loans subsidized by the state budget.
Of course, the state cannot dictate to commercial banks who to disburse credit to, but when it comes to strategic state interests, it can provide loans to those whom the banks aren’t interested in. Unfortunately, in our case the money that was intended to help develop agriculture ended up subsidizing the banks’ interest rates. Banks are gorging themselves on money, while the economy is decaying. This is a result of poor regulation,” Giorkhelidze said.
However, Vakhtang Charaia, Director of the Center for Analyses and Prognosis, believes the Cabinet’s current economic team was not weak, but the external factors were simply unavoidable.
“The current economic team is far from weak. The problems come from abroad. In 2008, after the short-lived war with Russia the international community gave a four-year financial support to Georgia that amounted to 4.5 billion USD. Commensurately, around a billion used to enter Georgia every year until 2012. In 2012, when the new government came, the financial aid had run its course, which has complicated things. The external factors aggravated the situation. I doubt anyone could’ve done better,” he said.
Mr. Muller disagrees with Vakhtang Cha­raia, believing the effect of external shocks could have and still can be mitigated. Internal factors can also be quickly brought under control, he claims.
“The Russian-Ukrainian conflict, which has dealt a major blow to Georgian exports and money transfers, started a year ago. The oil prices started dropping in summer of 2014 and the U.S. Federal Reserve announced that it was ending the quantitative easing, making it obvious that the dollar would start getting stronger. The National Bank of Georgia had to provide an adequate reaction to all these events, but it did not. The ministers blame the NBG for incompetence, claiming that its Governor Giorgi Kadagidze is an ally of the National Movement party and is blackmailing the government. But if they think this is true, why did not they remove him from his post in a timely fashion? Why did the government not take proper actions to mitigate the imminent risks the external factors posed? Now the economic situation is going through a crisis and it needs a creative team to find solutions. The team that has failed to prevent this crisis in the first place cannot possibly hope to fix it,” Muller concludes.
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 Head Speaker List featuring Circle, and Genesis Mining when Digital Mining Leaders Convene In Tbilisi on September 21-23
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.
Exchange Rates
GEL Exchange Rate
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
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