State budget 2011 duplicates defects of its predecessor
18 November, 2010
State budget 2011 duplicates defects of its predecessor

Project of state budget 2011 is still based on the “tight belt” policy and violates fiscal decentralization principles. Non-governmental sector and oppositionist politicians still reprimand the government for lack of transparency and ask the authorities to present more detailed description of expenses in the final version of state budget.

The revised version of the main fiscal document of the country in 2011 was sent to the government on November 15, 2010; after that it went through the secondary hearing on November 12, 2010. And now the government has to study the questions and recommendations made by the parliament and non-governmental organizations regarding the state budget project; and either build them in the final budget version or ignore them.


Usually the government does not take into consideration recommendations related with political decisions [expected to be implemented through the state budget]. To this end it still violates decentralization principle removing GEL 40 million from the regional self-governments’ yet meager budgets  in favor of the state-controlled regional development funds. The latter is supposed to tackle financing problems of self-governances if they face any. Thus de-jure independent regional governments appear well-dependent on the federal money.
“This is unacceptable for the normal fiscal decentralization environment,” Davit Narmania, Executive Director of the Institute of Caucasus Economic and Social Research, told Georgian Journal. “And no matter how ardently we argue now that it is a step backward from fiscal decentralization point of view nobody takes a heed to our opinion when the state budget project is put for parliamentary procedures. It would be better to air this issue earlier so as to enable us to provide with in-depth analyze how removal of this GEL 40 million might affect certain programs. It is not a big sum actually and government could find other resources to finance regional development funds without curtailing self-governances’ budgets in regions.”
As to economic facet of the matter government sometimes takes them into consideration. Authority turned out unprecedentedly benevolent to non-governmental sector and independent analysts this year during discussing the new tax code and summoned them for consultations during the state budget committee hearing as well. Whether or not it pays an attention to their opinion will be clear after the revised and final version of the state budget 2011 project will enter the parliament.
State budget 2011 increases by GEL 100 million compared to this year budget. It reaches GEL 7.088 billion and targets at 4.5

% of economic growth. Financing of education, health-care, infrastructure and  agriculture projects will be key priorities next year, Kakha Baindurashvili, Minister of Finances, said at Finance and Budget Committee sitting at parliament on November 11, 2010.
Financing of education as well as social and health-care increases by GEL 16 million and GEL 5 million respectively. According to Baindurashvili, the education system financing envisages salary growth to teachers, as well as teaching English language and computers that includes provision primary class pupils with PCs.
“English is the key communication language globe over and our children have to acquire due English skills to promote themselves and the country…similar can be said respective to computers, they are essential part of any sector today,” Baindurashvili said.
Guram Chakhvadze, an oppositionist MP, hailed government that pensions do not reflect the increased inflation rate and depreciation of national currency that affects yet meager pensions.  The promised increase of pensions to USD 100 [built in the pre-election campaign program] is still delayed due to crisis, Bandurashvili explained.

Financing of agriculture increases from GEL 14 million to GEL 53 million that is an unprecedented budget for agriculture during the last 15 years of Georgia’s independence, Minister accentuated. 
Infrastructure projects mainly will be focused on road construction and tourism.GEL 222.4 million is earmarked on augmentation of east-west highway, and GEL 129.4 million on motor car way bypassing Batumi and Kobuleti, Ajara region, so as to remove the existing road running all along the beach and vacate place for more hotel infrastructure development.
Economic analysts and non-governmental watch-dogs believe the state budget 2011 duplicates the problems of 2010: it undermines principles of the fiscal decentralization, is too optimistic and lacks transparency. About GEL 100 million worth expenses are not clearly outlined and other parts of financing also lack detailed description.

“Actually the budget of 2011 is more detailed compared to budgets of previous years but it is not sufficient as far as state budget and local budgets move to program and capital financing starting 2012 that is a difficult thing for all expenses must be built in details and charts very precisely. And government had better address to this policy as soon as possible,” Narmania said.
Baindurashvili swears that the state budget 2011 is still based on the “tight belt” policy undertaken by Georgian government in 2009 due to financial crisis and administrative expenses of government and budget-based organizations are cut down as much as possible.
Narmania who  questions the “tight belt” policy of Georgian government in 2010 proposes to provide non-governmental watch-dogs with a special report on “tight belt” policy of 2011 along with the state budget account to  make clear which state-budget-based instance saved money and how much as far as the underway budget format does not provide with such an opportunity.
“We closely monitored the so called “tight belt” policy of 2010 and we doubt that government  pursued it actually. So we propose Ministry of Finances to provide us with a special account of these “tight belt” policy-related expenses as far as the underway state budget does not include full information to this end,” Narmania said. 
Moreover the tax-based revenues of the coming year budget are planned to increases by GEL 770 million. And as far as economic analysts think Georgian economic reality does not lay ground to such optimistic prognosis; they fear that the planned revenues may be raised via stronger administration of penalties rate of which also increased [by new tax code]. However Baindurashvili played down these fears asserting that the revenue figure is based on economic growth of the country alone.

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