Budget 2012 : Bluff Program
03 November, 2011
Budget 2012 : Bluff Program

A bluff program bluff –this is how the non-governmental economic analysts nicknamed the draft project of the state budget 2012 that lacks programming skills as well as the tight belt policy, and 12.8% of it expenses is non-transparent.

“Is this a program bluff predestined for failure or just a weak non-qualified document?” -  This is the question the economic analysts with the non-governmental Association of Young Financiers and Businessmen (AYFB) ask after scrutinizing the draft paper of the main fiscal document

of the country for 2012.

The state budget 2012 is supposed to be the first official program budget worked out by Georgian government since Georgia is to adopt program budgeting starting 2012. The attempts of program budgeting was made in 2011 in order to improve skills and make program budget as reputable as possible by 2012. However these attempts lacked competence in 2011 economic analyst hailed government.

AYFB experts doubt that the underway budget project is no better than its predecessor as it shows quite feeble signs of program budget.

“Budgetary priorities are unchanged for 2012 as far as they lack detailed description of activities and obligations the state has to implement to remove defects. And yet the budgetary targets are put in place are so general that it is impossible to provide with the economic grounds for the budgetary expenses needed for implementation of the targets, or reflect them in economic  indicators,” the AYFB reported on October 21, 2011.

The state budget 2012 forecast stands at GEL 7. 673 billion and the priorities of the budget 2011 are almost duplicated as the accents fall on agriculture, healthcare, education and infrastructure development. However financing of agriculture decreases by GEL 10. 104 million next year and the sector will be funded by GEL 69.8 million while financing increases for the regional development and infrastructure ministry and totals GEL 914 million.  GEL 560 million will be earmarked to ministry of education.

Levan Kalandadze, an economic analyst, also finds that the state budget project lacks programming skills as far as sums earmarked on programs are non-classified and the expected financial results - dubious.

Lack of budgetary programming and planning skills is obvious when one takes a look at so called “other expenses” that provides with no concrete targets for financing and enables government to use budgetary money for ad hoc decisions. This kind of non-transparent gap in budgetary outlays became an endemic problem to Georgian state budgets for years and independent economic analysts press on more transparency without success as of yet.

“Other expenses” making GEL 887.004 million this year reduced a little bit in the draft budget 2012 to GEL 836.482 million thus covering 12.8% of the total state budget.

Kalandadze believes government will use this non-transparent part under “other expenses” for financing its pre-election campaign during the upcoming parliamentary elections 2012.

Experts question the much spoken about tight belt policy undertaken by government in 2008 to overcome aftermaths of the brief war with Russia in August 2008 and global financial crisis. This policy aimed at curtailing administration expenses of state structures. This policy was questioned in budgets of 2010 and 2011 and looks suspicious in the draft budget of 2012 too: According to the draft project, number of employees at state structures in of 2012 decrease by 592 persons however the salary fund for the state structure personnel increases by GEL 47.930 million [from GEL 1. 080 143 billion to GEL 1. 128 073 billion] it means that if an average salary in the state sector totaled GEL 10 787, the figure in 2012 will equal GEL 11 333.

“It apparently opposes the tight belt policy,” Kalandadze said.

The budget 2012 project envisages 4.7% increase of revenues; bigger part of this traditionally comes on tax revenues; that also are expected to grow by 7.9%. The increase is supposed to occur on expense of the inflation. Experts presume economic activity does not create ground for such a growth.

It is an open secret that inflation blows budgetary revenues up, the AYFN reminds. According to it, the planned 4.7% growth of total budgetary revenues in 2012 against the backdrop of the targeted 6% inflation rate means a 1.3% drop in revenues rather than a growth.

The situation is aggravated by the fact that the biggest part of tax revenues comes on those taxes [excise, Value Added Tax, import related tax etc] that in direct connection with the price change, non-governmental watchdog worries.

Moreover, about 85% of the total tax income is based on physical entities while just 15% of it comes on corporations and legal entities meaning that each citizen fills the state budget from his/her pocket.

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