At the plenary session of the Parliament of Georgia held on 5 February 2014, the representative of the Parliamentary Minority, Zurab Japaridze, stated: “Today, pensioners lose about GEL 12 a month from their pension of GEL 150. In a year, that almost adds up to their monthly pension.”
Similar statements were voiced by other members of the United National Movement, Zurab Chilingarashvili and Akaki Bobokhidze.Zurab Chilingarashvili:
“As for the pension, for the past ten years, this is the first year when the pension is reduced due to the inflation. Owing to the inflation, each pensioner loses roughly GEL 200.”Akaki Bobokhidze:
“This is the first year when in the conditions of inflation,the pension was reduced by GEL 12-13.”FactCheck
took interest in the abovegiven statements of the MPs conveying similar ideas.
We contacted Zurab Japaridze and tried to establish the methodology he employed for calculating the loss of GEL 12. As clarified by the MP, he compared the current GEL exchange rate (with respect to the USD) to the exchange rate of January 2013 and found a 12% difference between the two.
We measured the GEL exchange rate of January 2014 against the exchange rate of January 2013 and the result of our calculations was far less than 12%. In January 2013, the GEL exchange rate with respect to the USD stood at around 1.656 while in January 2014 it dropped from 1.736 to 1.781. Therefore, in January 2014, the GEL devalued by 4.85-7.51%. The depreciation of the GEL would have reached 12% if the rate had sunk to 1.85 in January 2014. However, in January, the exchange rate did not even reach the indicator of 1.8 but, afterward, started strengthening.
Furthermore, even the whole 12% depreciation of the GEL with respect to the USD does not automatically entail a loss ofGEL 12. Two major factors are to be taken into consideration when calculating the loss prompted by the depreciation of the currency: 1) the share of imported products in the pensioners’ basket of consumer goods and 2) the price increase of imported goods provoked by the 12% depreciation of the GEL.
For calculating the loss induced by inflation, it is advisable to assess the rise registered in the Consumer Price Index (CPI) in January; that is, to examine to what extent the prices of different consumer goods rose in January – be it a rise prompted by the devaluation of the GEL, an increase in the price of imported products or as a result of any other factors.
The monthly inflation rate (variation [in percentage] of the Consumer Price Index as compared to the previous month) amounted to 0.8% in January 2014 while the yearly inflation rate (variation [in percentage] of the Consumer Price Index as compared to the same month of the previous year) stood at 2.9%.
As can be seen the rates of monthly and yearly inflation are not high enough to have caused as large of a loss for the pensioners as asserted by the MPs in the abovegiven statements. Based upon the rough calculations, in January 2014, a pensioner lost GEL 4.35 owing to inflation as compared to the same month of the preceding year (150*0.029) whereas as compared to December of 2013 the loss amounted to GEL 1.2 (150*0.008).
Further, as an example, let us take a product which cost GEL 100 in January of the previous year. Given the inflation rate of 2.9%, in January of the current year its price will rise to GEL 102.9 (100*1.029) while a product which had cost GEL 150 will be worth GEL 154.35 (150*1.029) in January of the current year. Consequently, a product worth GEL 150 saw a price increase in the amount of GEL 4.35 relative to January of the previous year.
As a second example, let us take a product which cost GEL 100 one month earlier; that is, in December of 2013. Owing to the inflation rate of 0.8%, in January of the current year the price of the product will equal GEL 100.8 (100*1.008) while the product which had cost GEL 150 will be worth GEL 151.2 (150*1.008). Therefore, the product which had cost GEL 150 in December of 2013 will see a price increase of GEL 1.2.
Resulting from inflation, the pensioners whose pension equalled GEL 150 lose around GEL 4.35 as compared to the same month of the previous year while the loss of December, again as compared to the same month of the preceding year, amounted to GEL 1.2. These figures differ significantly from the number indicated by the MP.The statements voiced by the MPs Zurab Chilingarashvili and Akaki Bobokhidze are also undoubtedly inaccurate as they also point to an allegedly sizable loss in the pension prompted by inflation. The MPs might have made certain miscalculations but FactCheck
rates the accuracy of facts and the figures indicated by the MPs strongly diverge from the actual indicators.Additionally, FactCheck
took note of the part of Zurab Japaridze’s statement where the MP claims that the pensioners lose one month worth of their pension throughout the year. We found this assertion also to be misleading as the inflation rates of two months are not to be generalised onto the whole year. The shortcomings of the generalisation are exemplified by the fact that in the month of February the exchange rate of the GEL started strengthening relative to the indicator witnessed in January.Bearing in mind the arguments laid out above, FactCheck rates the statement with its lowest gradation and concludes that Zurab Japaridze’s statement: “Today, the pensioners lose about GEL 12 a month from their pension of GEL 150. In a year, that almost adds up to their monthly pension,” is a LIE.