The Georgian Government has presented a revised budget proposal reflecting negative economic impact of the COVID-19 pandemic. Prime Minister Giorgi Gakharia’s Cabinet plans to step up fiscal spending in order to offset effects of virus-induced recession this year.
“Economy-wise, major problem stemming from this crisis is its volatility – a huge challenge for a small, extremely open economy [like Georgia],” stated the Prime Minister on June 9 at a meeting with lawmakers and state officials overseeing fiscal policy.
Finance Minister Ivane Machavariani sought to give the gist of the reworked “anti-crisis budget,” saying that part of public expenditure deemed “irrelevant in light of the pandemic” was scaled down, while the Government attracted “new sources of funding” to bankroll its mitigating measures.
Total expenditures in the fiscal year 2020 are forecast to near GEL 16 billion – more by GEL 1,5 billion (USD 491 million) than the initial estimate.
Anti-crisis relief measures – along with other expenses incurred by the pandemic – will cost up to GEL 3,4 billion (USD 1,1 billion).
A fiscal update showed that budget receipts are expected to fall short of target, as anticipated revenue will decline by GEL 1,8 billion (USD 590 million). Fiscal deficit is set to swell to 8.5 % from estimated 2.5 % of the gross domestic product. Annual inflation is expected to hover around 3,5 %.
As for more detailed cost breakdown, a total of GEL 525 million (USD 172 million) will be allocated for disbursing crisis-related unemployment benefits. GEL 170 million (USD 55 million) will be spent on covering utility expenses. Personal income tax cuts are estimated to cut budget revenues by GEL 250 million (USD 82 million).
VAT refunds will cost the state budget GEL 600 million (USD 197 million). Another GEL 600 million is earmarked for a fiscal scheme to provide liquidity support for Georgian commercial banks.
The Government says various international donors, including the International Monetary Fund, Asian Development Bank, and German state-owned KfW have committed fiscal aid in form of loans and grants worth GEL 4,470 billion (USD 1,4 billion). StopCov relief fund – which was set up shortly after the onset of the outbreak – has been able to accumulate GEL 133 million (USD 44 million) chiefly through private donations.
Additionally, fiscal funds amounting to GEL 600 million were freed up from the present budget in an effort to make up for increased spending. Among government bodies taking biggest cut are Infrastructure Ministry (down by GEL 250 million or USD 82 million), Education Ministry (GEL 127 million or USD 42 million), Defense Ministry (GEL 75 million or USD 25 million), Tbilisi City Hall (GEL 35 million or USD 11 million).
The revised budget proposal will now be submitted to the Parliament for approval.
More on Government’s economic relief measures:
- Prime Minister Gakharia Unveils Anti-Crisis Plan to Mitigate Coronavirus Fallout
- Georgia Announces Tourism Stimulus Plan, Country to Reopen for Int’l Tourists in July
- Georgia Unveils Plan to Help Construction Business amid Pandemic