"[The Georgian Dream government] will help to increase the trust toward the national currency and ensure a decrease in the scale of dollarisation." (Election Programme, page 48)

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In October 2012, the USD to GEL exchange rate stood at 1.66 whilst it reached 2.5 at the beginning of 2016 and today stands at 2.33. The depreciation of GEL naturally resulted in a decrease in the trust toward the national currency.

The trust toward GEL is best depicted by the scale of dollarisation. The rate of dollarisation means the share of bank deposits in foreign currency as a portion of all of the country’s bank deposits. The more the population has trust toward GEL, the less is the rate of dollarisation. Additionally, if the population has its loans and savings in GEL, any fluctuation of the GEL exchange rate will not harm them and currency risks will be minimised.

At the end of September 2012, the dollarisation coefficient of bank savings was 60.7% whilst the share of all non-bank deposits was 63.8%. At the end of October of the same year, the dollarisation of bank deposits was 61.8% and 65% for non-bank deposits. At the end of July 2016, however, the dollarisation coefficient for bank savings was 66.3% and 68.9% for non-bank savings. Under the Georgian Dream government, the rate of dollarisation did not decrease but, on the contrary, it increased.

"By carrying out the right policy, [state] debts will be maintained and managed at optimal levels which, at the same time, will promote the economic prosperity of the country." (Election Programme, page 52)

Promise Mostly Broken


At the end of 2012, Georgia’s domestic debt was GEL 1.89 billion (7.2% of the gross domestic product) and reached GEL 2.87 billion (8.9% of the GDP) at the end of June 2016. The country’s domestic debt rose by almost GEL 1 billion. Graph 1 illustrates how the state debt was altered in the past years (including other credit debts).

Graph 1:

 Georgia’s Domestic Debt

image001 Source: Ministry of Finance of Georgia  

In 2012, Georgia’s state debt amounted to USD 4.35 billion whilst it was USD 4.4 billion in June 2016. Therefore, the growth constituted approximately USD 50 million. The Government of Georgia’s foreign debt taken separately was USD 4 billion at the end of 2012and reached USD 4.4 billion at the end of June 2016. The growth is approximately USD 400 million. The significant difference between the decrease in the government’s debts and the state’s debt is due to the National Bank’s decision to repay its debt obligations. At the end of 2012, the National Bank’s foreign debt was USD 360 million and amounted to only USD 12 million at the end of June 2016.

Graph 2:

 State Debt to GDP Ratio

image003 Source: Ministry of Finance of Georgia  

Measuring the nominal debt does not give a full understanding of its size as a burden for a state. A country’s nominal debt might appear very large but if its economy is large as well (that is, the country is rich) then a high nominal debt is not a significant problem. In 2012, the state debt to GDP ratio was 34%. As illustrated by Graph 2, the debt to GDP ratio reached its maximum in 2015 when it stood at 41.5%. In 2016, this indicator decreased by 0.5% and dropped to 41%.

Of note is that from 2012 until June 2016, the state foreign debt increased by GEL 3 billion which is largely the result of the depreciation of GEL. The country takes its foreign debt in a foreign currency but then has to buy foreign currency with GEL at the time of repayment. Therefore, the state budget’s debt service component is calculated in GEL which means that any GEL depreciation directly impacts the burden of the foreign debt service. If the Government of Georgia had not taken additional foreign debt, the GEL denominated debt would still have increased both nominally and as a share of the GDP because of the depreciation of GEL.

From 2012 to 2016, both domestic and foreign state debt increased. As a result of the growth of the domestic debt and the depreciation of GEL, the state’s debt denominated in GEL increased by GEL 4 billion. Consequently, the state debt to GDP ratio increased from 34% to 41%. The burden of debt is best depicted by the debt to GDP ratio.

Even though the state debt increased, it has not reached the point where debt service could pose a problem for the country which would then face a debt crisis.

"If sanctions are imposed, a company’s inventory will not be sealed and its business activities will not be limited." (Election Programme, page 45)


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Chapter 11 of the Tax Code of Georgia regulates the payment of tax liabilities and Article 254 of the Tax Code of Georgia regulates tax liabilities during a tax dispute and the rights of taxation organs in the process.

In “sealing inventory,” this probably refers to the sequestration of the property of individuals with tax liabilities. Articles 241 and 242 of the Tax Code of Georgia define one of the measures for ensuring tax collection as the sequestration of the property of an individual with tax liabilities. The existing redaction of these Articles is as follows: “A tax authority shall be authorised to impose a pledge on any property owned by person and/or recorded on its books (with the exception of the property received under leasing) within the range of ensuring the collection of a recognised tax debt.” There is no additional clause about the non-enforcement of these Articles vis-à-vis certain categories of property (such as inventory) as an exception.

The aforementioned promise was not fulfilled although certain positive changes were enacted in terms of the procedures for the collection of tax liabilities.

"A USD 1 billion fund for agricultural development will be established. The fund will finance agricultural programmes and contribute its financial means to give preferential loans to farmers and for agricultural insurance." (Election Programme, page 37)


The Rural and Agricultural Development Fund, a non-entrepreneurial (non-commercial) legal entity, was established on 22 January 2013 with the aim of carrying out agricultural support programmes. The Fund’s donors are the International Charity Fund for Rural and Agricultural Development and the Cartu International Charity Fund, both legal entities of private law.

The Rural and Agricultural Development Fund carries out the following two projects: Support for Land-Poor Farmers’ Spring Agricultural Workand the Preferential Agro-credit project.

The Support for Land-Poor Farmers’ Spring Agricultural Work programme has been ongoing since 2013. Farmers are given agriculture cards which enable them to cultivate their land free-of-charge as well as obtain seed material and fertilisers.

There were 701,220 beneficiaries involved in the Support for Land-Poor Farmers’ Spring Agricultural Work programme by 2013 (see FactCheck’s article 1 and article 2)

whilst the total area of cultivated land comprised 208,375 hectares. As of April 2016, the number of beneficiaries involved in the project decreased to 428,116. Presently, 173,291 hectares of land is being cultivated.

In regard to the Preferential Agro-Credit project (see FactCheck’s article 1, article 2, article 3), 111

new enterprises have been launched and 26,000 loan contracts were signed within the framework of the project by April 2016.

An agro-insurance programme has also been launched since 1 September 2014 (see FactCheck’s article).

The state covers from 70% to 90% of the cost of insurance packages. As of April 2016, 28,690 insurance packages had been issued and 23,667 hectares of land were insured.

Bidzina Ivanishvili: "Grapes should not cost less than GEL 1."

Promise Partly Kept

For years, the Government of Georgia intervened in various different ways for determining grape prices, mostly through subsidising the harvest. The state has been carrying outa grape subsidisation programme since 2008. The Government of Georgia decided to start grape subsidies in order to alleviate the negative consequences of Russia’s trade ban and support the grape growing and winemaking fields.

Grape prices, including subsidies, have been the following:

Table 1: 

Purchase Price (GEL) of Red and White Grape including Subsidy in 2010-2015

Year 2010 2011 2012 2013 2014 2015
White GEL 0.6 GEL 0.7 GEL 1 GEL 1 GEL 1 GEL 0.6
Red GEL 0.8 GEL 1 GEL 1 GEL 1.3 GEL 1.95 GEL 0.85
Racha (red) GEL 3 GEL  3 GEL 4 GEL 8 GEL 8 GEL 8
Source: Ministry of Agriculture of Georgia  

Subsidies for grapes have been determined annually with the following amounts:

Table 2: 

Amount of Money (GEL) Allocated for Grape Subsidies

Year 2008 2009 2010 2011 2012 2013 2014 2015
Rkatsiteli GEL 0.15 0.15 GEL GEL 0.15 GEL 0.15 GEL 0.25 GEL 0.4 GEL 0.35 GEL 0.35
Saperavi GEL 0.25 0.25 GEL GEL 0.25 GEL 0.25 GEL 0.35 GEL 0.35 GEL 0.15 GEL 0.15
Mujuretuli - GEL 1 GEL 1 GEL 1 GEL 1 - - -
Total 6.1 million 5.5 million 4.7 million 8.7 million 14.8 million 32 million 32 million 30 million
Source: Ministry of Agriculture of Georgia  

As illustrated by the tables, grape prices in the last years (2013-2014) have not been below GEL 11. The only exception was last year when the relatively low price resulted in the wide discontent among grape growers.

As we have noted, grape subsidies have been allocated since 2008. During these years, GEL 133.8 million was allocated from the state budget for paying out the subsidies. In spite of the state’s support, problems still remain in the grape growing and winemaking fields. The ongoing events in neighbouring countries in 2015 caused a decrease in wine export to the large export markets (Russia and Ukraine) which in turn caused a drop in the demand for grapes. In a market economy, the price of a product is determined by the balance of supply and demand. In 2015, the grape supply (harvest)increased as compared to the previous year although demand (due to a decrease in wine export) dropped. Considering the reality on the ground, grape prices should have decreased. However, the promises of politicians (namely, the aforementioned promise) and the subsidisation policy over a period of several years (both under the previous and incumbent governments) created unrealistic expectations among  grape growers. Therefore, in spite of the allocation of GEL 30 million for grape subsidies in 2015, grape prices were disappointing for the farmers.

It is clear for the government that constant subsidies for the field do not comprise a solution. At one of the sessions of the Government of Georgia, the former Minister of Agriculture, Otar Danelia, stated: "In general, subsidies are not right and we have to do our best to avoid the subsidisation of the field." However, in July 2016, Mr Danelia again announced grape subsidies: "The subsidies for one kilo of Rkatsiteli and Kakhuri Mtsvane grapes will be GEL 0.45, GEL 20 for Saperavi and GEL 2 for Mujuretuli and Alexandrouli."

"The budget will be published in a simplified format and discussed publicly. The share of unspecified or so-called ‘other expenses’ in the budget will decrease." (Election Programme, page 51) 

Promise Partly Kept

As compared to 2012, information about the 2016 state budget was published in a more complete and detailed manner. This is a result of the transformation of Georgia’s budget system into programme budgeting. The year 2016 is the first year when the Ministry of Finance published all of the accompanying programme budget documents. The format corresponds to international standards and requirements. It is a different matter that programme budgeting in Georgia has hitherto been conditional and that the quality of the elaboration of programmes is in some cases very low. For instance, midterm and final goals and assessment indicators are not clearly given. There is no effective monitoring of the fulfilling of programmes and the performance of a spending entity is assessed by the full absorption of allocated funding instead of the quality which was achieved with these funds.

The simplest format for delivering a budget to citizens is the so-called Citizen’s Guide. The Guide did accompany the 2012 state budget but 2016’s Citizens Guide is more comprehensive than it was four years ago.

In regard to public discussions, there are no such events. The upcoming year’s budget document becomes generally available in November when budget discussions are launched at the plenary sessions of the Parliament of Georgia. We could say that a significant portion of the public is not involved in drafting the budget in that it is prepared by the Ministry of Finance and spending entities alone.

Before 2013, the “other expenses” budget line was not published in detail. From 2013, “other expenses” is being published in detail and is available on the Ministry of Finance’s website. In regard to the share of “other expenses,” this amount was GEL 1,147 million in 2012 which constituted 17% of all expenses. In 2016, the “other expenses” budget line amounts to GEL 1,307 million which is 15.3% of all expenses. The share of “other expenses” has dropped slightly. Additionally, this share is decreasing not because of a cut to the “other expenses” budget line but because of a general rise in the total amount of expenses.

"We believe it is necessary to define in the Constitution that the National Statistics Office of Georgia is an independent organ, accountable to the Parliament of Georgia, whose director is appointed by the President of Georgia for a five-year period with the consent of a majority of MPs, including the majority of the Parliamentary Opposition." (Election Programme, page 13) 

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One of the promises of the Georgian Dream concerned the National Statistics Office of Georgia (Geostat) which the authors of Georgian Dream programmes believed not to be independent from the previous government.

Under the Georgian Dream’s rule, the activities of the National Statistics Office of Georgia were not defined in the Constitution. The National Statistics Office of Georgia uses the Law on Official Statistics in this regard. According to Article 8 of the law, the Office’s executive director is appointed and dismissed by the Prime Minister of Georgia. The law was amended twice in 2013 and 2015, respectively, although neither of these amendments were related to the Georgian Dream’s promise.

"In the shortest period of time, we have been carrying out a new and just calculation of tariffs which will significantly decrease their amounts." (Election Programme, page 31)

Bidzina Ivanishvili: "The levels of taxes which are in Georgia now can be halved from tomorrow… Georgia has very cheap electricity. We have plenty of HPPs and they produce cheap electricity. We receive a lot of gas for free because the pipeline goes through our territory. The commercial price for gas received from Azerbaijan is very low as well… If we take all of these together, in the best case scenario gas tariffs will be one-third of what they are today."

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According to the promise of the Georgian Dream, there was to have been a new and just recalculation of tariffs resulting in their very significant decrease in the nearest future.

Since January 2013, the tariff for consuming less than 300 kwt/h of electricity decreased by GEL 0.0354 and the tariff for consuming more than 300 kwt/h of electricity decreased by GEL 0.027. As a result of the depreciation of GEL, imported and thermal power plant generated electricity became more expensive. In August 2015, the electricity tariff increased and exceeded the margins in every category (except one when consumption is less than 101 kwt/h) as compared to what it was before January 2013. FactCheck has previously written

about this topic.

According to Bidzina Ivanishvili’s promise, the gas tariff was to decrease threefold. According to the information of the Georgian National Energy and Water Supply Regulatory Commission (GNERC), gas tariffs were revised after 2012. From 1 March 2013, the price for natural gas for household consumption dropped by GEL 0.05 (10%).

"The prices for fuel, pharmaceuticals and other products will decrease which will be achieved through healthy competition and this will be felt by the population almost immediately." (Election Programme, page 44)

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According to the data of the National Statistics Office of Georgia, the prices for medication dropped in 2011-2012. This trend was kept in 2013 as well and prices indeed decreased, albeit slightly. In 2014-2015, the prices for commonly used medication rose by 32.5%. In regard to 2016, the prices for medication have increased again as compared to the previous year.

In regard to the general increase in product prices in the country, we calculated to extent to which food prices have increased since 2012 using the Consumer Price Index published by the National Statistics Office of Georgia. If you needed GEL 200 to buy a certain amount and types of products at the end of 2012, you needed GEL 225 to buy the same list of products at the beginning of this year. Therefore, food prices increased by 12.5% in 2013-2015. According to this year’s data, the increase in food prices was effectively halted. In August, the annual inflation rate for food prices was 0.6%.

In regard to fuel prices, the average price for one tonne of petroleum on the world market was USD 1,050 in 2012 whilst the price this year is USD 392.

According to the information of the Georgian Union of Importers of Petroleum Products, the average price for fuel in retail chains was the following in 2012:

  • Super type petrol – GEL 2.33 per litre
  • Premium type petrol – GEL 2.27 per litre
  • Euro regular type petrol – GEL 2.12-2.17 per litre

As of September 2016, the retail price for petrol in retail chains was the following:

  • Super type petrol – GEL 1.89 per litre
  • Premium type petrol – GEL 1.75 per litre
  • Euro regular type petrol – GEL 1.62 per litre

Of note is that the average price for petrol on the world market dropped by approximately 53% in 2016 as compared to 2012. As illustrated by the given information, the retail price for petrol in Georgia has decreased slightly, by 12% as compared to 2012. Together with other additional factors, fuel prices are significantly influenced by the GEL to USD exchange rate. Therefore,the price for fuel would have been much lower if not for the depreciation of GEL in previous years.

The Government of Georgia did not decrease excise and value added taxes after the 2012 elections. Therefore, in this case, the policy of the Government of Georgia did not have a direct impact upon the decrease in fuel prices. At the same time, after the Georgian Dream coalition came to power, fuel prices increased and decreased several times on the local market pursuant to prices determined by trading on the international market. Therefore, it is incorrect to say that fuel prices dropped as a result of government intervention.