At the session of the Parliament of Georgia held on 2 April 2014, representative of the Parliamentary Minority, Zurab Japaridze, discussed the economic affairs of the country and stated: “I would like to tell you several figures that are alarming. For instance, in March of 2013, tax revenues amounted to GEL 710 million, in March of 2014 – 686 million. You have a decrease in comparison to March of the preceding year as well. The volume of external debt has also seen an unprecedented growth: in two months, January and February, domestic debt grew by GEL 146 million while foreign debt increased by GEL 46 million. If we examine the indices of the past years, we see that growth of this extent in the domestic debt has not been registered in the whole year, let alone in two months.”FactCheck
studied the factual indices of the Georgian budget as well as the statistics of state debt and checked the accuracy of the MP’s statement.
In line with the data published on the website of the state treasury, in March of 2013 tax revenues (which include income tax, profit tax, value added tax, import tax, property tax, excise tax, etc.) amounted to GEL 710 million while in March of 2014 – GEL 686 million. These indices precisely correspond to the figures indicated by the MP and, as can be seen, the tax revenues of March 2014 are indeed outstripped by the indicator of the same period of the previous year (by GEL 24 million).
For a deeper analysis of the matter, along with the indices of March of 2013-2014, it is advisable to also examine the overall revenues registered in March and the first quarter as well as the receipts, budget shortfall and tax revenues of the first quarters of those years.
In March of 2014 the revenues (which include tax revenues, grants, interest, dividends, rent, administrative fees and taxes, etc.) grew by GEL 709 million while in March 2013 the growth amounted to GEL 726 million. As for the first quarter of 2014, revenues totalled GEL 1,696 million whereas in the same period of 2013 the volume of income equalled GEL 1,641 million.
In March of 2013 the budget (which includes revenues, decrease of financial and non-financial assets and the growth of bonds) increased by GEL 839 million while in March of 2014 – by GEL 848 million. It is also to be noted that the 13% growth of the budget in March 2013 (by GEL 105 million) and the 14% upturn in March of 2014 (by GEL 116 million) were fuelled by the growth in bonds. Accordingly, in March of 2013 and 2014, bond-fuelled growth in the budget was prompted approximately by the same percentage of increase in bonds.
In the first quarter of 2013 the budget totalled GEL 1,795 million whereas in the first quarter of 2014 – 2,038 million. Of this, in 2013 bonds accounted for 8% (GEL 138 million) of the budget, whereas in 2014 – 14% (GEL 292 million). If we compare the difference between the budgets of 2013 and 2014 with the variation of bonds in those years (the difference between the budgets is equivalent to GEL 243 million whereas the variation in the growth of bonds equals GEL 154 million) we see that the increase in the budget of 2014 as compared to 2013 was larger than the growth observed in bonds.
As concerns the shortfall in the budget, in the first quarter of 2013 the shortfall in the budget amounted to GEL 188 million whereas in the first quarter of 2014 – GEL 62 million (in the first quarter of 2014 the budget was forecast to amount to GEL 2,099 million whereas the factual execution amounted to GEL 2,038 million).
It should also be mentioned that the tax revenues totalled GEL 1,553 in 2013 whereas in 2014 the indicator equalled GEL 1,639 million.Table 1: Factual Indices of State Debt (GEL thousand) Source: Ministry of Finance of Georgia; mof.ge
As for the state debt, at the end of February 2014, external debt (factual data) amounted to GEL 7,338 million whereas at the end of 2013, as can be seen in Table 1 – GEL 7,296 million. Consequently, in January-February of 2014 external debt grew by GEL 42 million as compared to December of 2013. Examining the dynamics of domestic debt, we observe that at the end of February 2014, the volume of domestic state debt stood at GEL 1,491 million whereas at the end of 2013 the indicator equalled GEL 1,345 million. Consequently, in January-February of 2014 domestic debt increased by GEL 146 million relative to December of 2013. On the whole, the numbers enumerated above verify the figures indicated in Zurab Japaridze’s statement.
In terms of external and domestic debt we observed the following situation in the past years:
By the end of February 2012 external debt amounted to GEL 7,088 million while at the end of February 2011 – GEL 7,064. Comparing the indices of February 2012 and February 2011 to the indicators of the preceding year (as shown in Table 1) we see that in two months of 2012 (January-February) foreign debt grew by GEL 72 million relative to 2011 whereas in the first two months of 2011 (January-February) external debt increased by GEL 85 million in comparison to 2010. Therefore, the growth of GEL 42 million registered in external debt in January-February of 2014 does not represent an unprecedented extent of growth when compared to the same indicators of the past years. However, it is of further note that in line with the 2014 budget foreign debt is projected to grow by GEL 530 million in 2014 and this does indeed represent the highest indicator in comparison to the annual indicators of the previous years with the exception of 2008, 2009 and 2010 (note: following the Russian-Georgian war of 2008 the international community provided assistance to Georgia in the amount of USD 4.5 billion of which USD 2 billion was given in the form of a grant whereas the remaining USD 2.5 billion – in the form of a credit).
As for the dynamics of domestic debt, as can be drawn from Table 1, from 2005 to 2010 it was characterised with a tendency of decline whereas beginning from 2010 to present – with a tendency of increase. In 2010, domestic debt surged by GEL 151 million, in 2011 – by GEL 52 million, in 2012 – by GEL 9 million, in 2013 – GEL 115 million and in 2014 – by GEL 1,239 million. It should be noted that the pure growth of domestic debt in 2014 is forecast to amount to GEL 600 million. The state debt limit is set at GEL 1,239 million and apart from the projected growth of the debt also includes the historic debts of the country which roughly amount to GEL 640 million at present. If we compare the growth of GEL 146 million observed in domestic debt in January-February of 2014 to the indicators of the same period (January-February) of the past years it becomes evident that the growth of GEL 146 is indeed unprecedentedly high. However, if we compare GEL 146 million to the annual growth of domestic debt (Table 1), we see that consistent with the assertions of the MP, the same holds true with the only exception of the year 2010 when the domestic debt grew by GEL 151 million. It is also to be noted that the growth of GEL 600 million in domestic debt is indeed unprecedentedly high in comparison to the indices of the previous years.
Our inquiry about the accuracy of Zurab Japaridze’s statement revealed that in March of 2013 tax revenues mounted by GEL 710 million while in March of 2014 the growth equalled GEL 686 million. Similarly, the overall revenues of March 2013 exceeded the revenues of March 2014. However, in 2014 we observe better indicators than in 2013 in terms of the budget size of March as well as the revenues of the first quarter, budget shortfall and tax revenues.
In January-February of 2014 external debt grew by GEL 42 million as compared to December of 2013 whereas domestic debt rose by GEL 146 million. If we compare the growth of GEL 42 million to the indicators of the same period (January-February) of the previous years it becomes evident that this magnitude of growth does not represent an unprecedented occurrence. If we compare the annual growth of external debt to the indicators of the previous years, the GEL 530 million growth of external debt projected in the 2014 state budget indeed proves to be unprecedentedly high.
As for the domestic debt, the comparison of GEL 146 million growth registered in January-February of 2014 with the growth of the same period of the previous years reveals this indicator to be the highest. However, if we compare this figure to the annual growth of domestic debt registered over the past years we see that the growth of GEL 146 million is outweighed only by the indicator of 2010 when the volume of domestic debt mounted by GEL 151 million. Additionally, if we compare the pure growth of domestic debt in 2014 in the amount of GEL 600 million to the annual indicators of the previous years the growth of this magnitude does indeed prove to have no precedents in the past.Consequently, we conclude that the MP’s statement: “In March of 2013 tax revenues amounted to GEL 710 million, in March of 2014 – 686 million. You have a decrease in comparison to March of the preceding year as well. The volume of external debt has also seen an unprecedented growth: in two months, January and February, domestic debt grew by GEL 146 million while foreign debt increased by GEL 46 million. If we examine the indices of the past years, we see that growth of this extent in the domestic debt has not been registered in the whole year, let alone in two months,” is HALF TRUE.
Originally published in The Financial, issue N. 18(398)