Ministers Reflect | David Lezhava (DMoF 2012-2016)
Ministers Reflect is a new interview series on “how to be effective in government”, following a model developed by the Institute for Government in London. The series seeks to capture – in former ministers’ own words – what it takes to be an effective government minister, what challenges they face, and what broader lessons their experiences may hold.
The interview was conducted on 25 May 2023, by Hans Gutbrod, Revaz Tchitanava, and Sandro Tchitchinadze, all at Ilia State University.
Today’s Guest:
David Lezhava was the Deputy Minister of Finance from 2012 to 2016. Prior to assuming this role, he worked at the National Bank of Georgia as Chief Economist from 2006-2010 and at the International Monetary Fund (IMF) as Advisor to the Executive Director from 2010-2012. David Lezhava holds a Master’s degree in Development Economics from Williams College (USA) and a Candidate’s degree in Physics from The Academy of Science of Georgia.
Before you joined the Ministry of Finance, you had extensive experience in the National Bank, and you were at the IMF. When you think back to when you started, how is it to come into the role of a Deputy Minister of Finance?
David Lezhava Coming into the role of a deputy minister has two extreme sides: it feels rewarding and disappointing also. It is rewarding because every decision you make, whether it is small or big, is a decision that affects the lives of people. That is a position of responsibility but there is something very positive about it, as you were given a chance to do something good for your country and for your people. That remains amazing.
At the same time, there are a lot of disappointing sides. Sometimes you know that something needs to be done differently, and you don’t have enough power to push for what you consider to be right. Sometimes you are in a minority, others have a different opinion, and you must respect that. You go home, you’re thinking “We are now making a mistake”, and that is disappointing.
It is also disappointing when you know that you are trying your best and when somebody criticizes you without knowing all the details and discusses how you benefit from your position and enjoy life, and when people allege that every single decision made by government officials is for their own benefit. Afterward, when I left government service, I looked back and noticed things we could have done better, or you realize you believed in something and it turns out not to be true, again, that is disappointing.
Still, if you ask me, if I could go back in time, I would again go for the job because it was a really rewarding time. Overall, you can consider yourself lucky if you have the chance to serve your country.
On coming into government, were there any things that surprised you – aspects that people outside of government politics do not entirely understand?
DL: I did come to realize that many people look at the behavior of government officials in a simplistic manner. If something was not clear to somebody, they often jumped to the conclusion that you’re either incompetent or taking the wrong steps on purpose because you are betraying your country.
That is not a good thing. There were officials about whom my friends would later say that “Oh, they are doing wrong things to the country” – but when I had seen these officials up close, I could not see any questionable intentions. In my time, 95% of the officials with whom I interacted were very much motivated to do good for the country. Sure, opinions on any topic could differ. But I could see that everybody wanted to do whatever they considered to be correct for the country. This is something that, from the inside and from the outside, is seen differently.
One additional aspect is that when a government makes a decision, it does not mean that everybody in that government shared that opinion.
One additional aspect is that when a government makes a decision, it does not mean that everybody in that government shared that opinion. Sometimes there is a decision from the top level, and you don’t have enough influence, but oftentimes decisions are the result of some consensus or compromise. People on the outside assume that you are fully agreeing with whatever decision was made.
In retrospect, what stands out as a specific project, achievement, or reform that were important for the time that you were in the Ministry?
DL: There were several small and big achievements. Among those, I could name bilateral and multilateral negotiations on public debt, becoming a founding member of international organizations, or bringing IMF international courses to Georgia. These were projects limited to the Ministry of Finance’s mandate, but there were also cross-sectoral projects. In many situations, the Ministry of Finance has to play a coordinating role within the government. From the very first months at the Ministry, we led the creation of the country’s development strategy called “Georgia 2020.” This became a guiding document for a number of years for social and economic policy.
Line ministries always have a temptation to implement projects with unlimited financial resources. Mostly, we managed to maintain prudence.
Despite these and other achievements, I think managing to keep prudent macroeconomic policies in the country was the most valuable thing we did. Line ministries always have a temptation to implement projects with unlimited financial resources. In my position, I was overseeing public debt. I was the major counterpart for international donors and financial institutions, and all the borrowing and the grants that were coming to the country were discussed with me. Mostly, we managed to maintain prudence. We also did not provide any written guarantee for which the government would have to pay in the future. This may not sound overly ambitious, but for the Ministry of Finance, a major achievement is already if one does not make big mistakes.
Was it difficult to keep to a prudent macroeconomic course? Presumably, other ministries often had other ideas.
DL: It is possible that sometimes we were too strict. To take one example, Keti Bochorishvili [Deputy Minister of Economy, see Ministers Reflect interview] was very keen to support the development of various industries, for example, film production in Georgia. It was natural that we had differences — she wanted incentives and tax breaks, and I had to stand on the side of prudent macroeconomic policies, and against exemptions or favorable treatment. We were good friends and still are. Having different positions in different roles, in the end, can contribute to better and more nuanced decisions.
From how you describe it, is the role of doing good policy in the Ministry of Finance often to say “no”? Did you have to do a lot of explaining to people why certain things cannot be done?
DL: There were many such cases. Sometimes it was easy to explain; some people immediately understood why I was taking that position and came around. In other cases, people tried different ways to overrule a decision and implement what they thought was correct. Sometimes they succeeded, too. But mostly, it was possible to prove to others that it was right to be cautious.
That connects to another thing we managed to introduce in my time. When I was Deputy Minister, we started measuring fiscal risks and incorporating that measurement into the state budgets. After I left, this process improved further and became more extensive. For the Ministry of Finance, it was an important step to think about risks that are not material now but could become a challenge later on.
Measuring fiscal risk is good for the Ministry of Finance, but it also helps explain to all the line ministries that decisions that seem very innocent at the moment can carry a big risk if something happens. To take an example, there were discussions about providing guarantees for hydropower plants. That sometimes forces you to choose what you want as a government and country. We had to highlight the fiscal risk of such guarantees, but then on the other side, there is energy security and the risks of being dependent on imports. A structured approach to fiscal risk can be helpful in such a case.
How about your day-to-day tasks and responsibilities? What did a typical day or week look like for you?
DL: As it happens, a colleague a few weeks ago asked, “Come on, how could you have been busy at the Ministry of Finance? What were you doing there?”
In reality, it was a very hectic job. Everyone at the Deputy Minister level worked a lot. We were starting no later than 10 AM, and on ordinary days, we would typically work until 11 PM. Sometimes we finished at 3 AM in the morning. On top of that, I was the counterpart of many international organizations, so I had to travel a lot. I probably spent half of the time abroad. Those trips could last a day, sometimes two or three trips in a row lasted a week or 10 days. When you’re coming back from the trip, and your coworkers are waiting for you and for your decisions, you need to catch up. That added to the load.
I love traveling, but business trips are different. I could not imagine it becoming so exhausting. After about three years, I noticed that I was becoming less efficient. I was making decisions slower because I was exhausted.
When at the Ministry, we usually had seven or eight back-to-back meetings a day, which lasted on average one hour. Attending numerous meetings was a necessary part of our work. Although some meetings could be tedious, they remained an essential obligation.
Then there are the details you need to get right. Many decisions require you to think on a technical level, you have to discern what is correct and what is not, and you also have to think about how you can convince others. When conducting negotiations, you must know essential details and analyze them inside out to make the right decision. You can delegate some of this work, but you must make the decisions. Luckily, I had a very competent and hardworking staff who prepared everything for me to make decisions quickly.
What crises did you have to manage? Are there any examples that come to mind, and how did you deal with that crisis?
DL: One challenge came when I was responsible for negotiations with the IMF. These discussions with the IMF went off track, and the program was halted for a year.
In situations like these, you have to fight on both sides. At first, I didn’t succeed, but there were several stages of those negotiations. In some aspects, the IMF was fairly rigid, but in others, they were on the side of prudent policy, and the government needed to make a concession. Overall, the fact that we had an IMF program was very helpful. I was trying to be on the side of the prudent policy, and the IMF was my ally. Often, in crises, you do need to balance out various aspects and choose the best out of imperfect options.
It must have been particularly interesting for you because you also knew the IMF from your previous experience. You saw some of the most senior-level decision-making there. How did that experience at the IMF change or expand your perspective?
DL: The previous experience at the IMF was very helpful. I had been an advisor at the Executive Director’s office. All the board decisions were coming through our office. From that, I was informed about the programs across countries and how they are managed. Once I was in the Ministry, I could compare the Georgian government’s behavior with the programs of other countries that I had seen while at the IMF.
I could compare the Georgian government’s behavior with the programs of other countries that I had seen while at the IMF.
As I understood both sides of the discussion, I could argue with the IMF Mission and point out that they applied different standards to other countries. Conversely, I could point out to my colleagues when we were doing something that no other country is doing and recommend that we play according to the rules of the game.
That helped me be a negotiator during those discussions. I think the IMF Mission trusted me more because they knew that I knew what their policies were. I could take their suggestions and see how they connect with the political atmosphere in the government. On the other hand, the government trusted me that I would do whatever possible to convince the IMF when they had a plausible case.
You had insights from various perspectives – the National Bank, the IMF, and the Ministry of Finance. What are things that most citizens of Georgia don’t understand about how economic policy gets made?
DL: People typically do not want to go into the details of economic policy. In the end, people want to be wealthier. That’s the bottom line. They do not care why the exchange rate is depreciating or whose responsibility that is.
People typically do not want to go into the details of economic policy. In the end, people want to be wealthier.
What they do know is that they borrowed foreign currency from a commercial bank, they were expecting to pay a certain amount in their monthly repayment – and now they are paying more. Who they will blame oftentimes depends on who has better PR.
To be fair, I also don’t think most citizens need to understand what the role of the National Bank or of other ministries is. What is more important is that these institutions understand their roles, that they understand that their interests sometimes can be conflicting and that they respect each other’s interests.
How does communication between the National Bank of Georgia and the Ministry of Finance happen in practice?
DL: It depends on who is the Minister of Finance, who is the Prime Minister, and who is the Governor of the National Bank. There is no one rule for these kinds of exchanges of opinions. If there is something that worries the government a lot, let’s say the exchange rate is depreciating, they might meet every day or they call each other every second hour. If nothing specific is happening, a month or two may pass and there is no communication. Consultations also happen at different levels. Sometimes it was at the level of deputy minister and vice governor; sometimes, it was at the minister and governor’s level; sometimes at the prime minister and governor’s level. It depends on the context.
What were the most significant lessons you learned during your time as a Deputy Minister?
DL: Maybe two lessons stand out. The most significant lesson for me was that you need to allow others to make decisions on your behalf and also to be responsible for the decisions of your subordinates. Otherwise, you will not manage to make all the decisions on your own.
You need to allow others to make decisions on your behalf and also to be responsible for the decisions of your subordinates.
Moreover, you learn that whatever you think about yourself is not what people think about you. You need to be ready that sometimes people’s opinion about you is not fair. It was clear to me before, but being a Deputy Minister made it even clearer that sometimes you have to sacrifice your image of being a good guy. You may make decisions that your friends will find hard to forgive. That’s the price you’re paying for being a servant to your country.
A person that we cannot interview is Mr. Khaduri. [Nodar Khaduri was Minister of Finance from 2012 until 2016, and passed away in September 2019.] Is there anything that stands out from your experience of working with him?
DL: We worked together for four years. I didn’t know Nodar Khaduri before. One of his deputies introduced me to him as a potential candidate for a role in the ministry. When I was coming to the interview the day before, I had thought of the different macroeconomic challenges the country could be facing, and I had planned my responses. I came to his office, and he just looked at me, and he said, “Oh, it’s you. So, do you want to work together with us?” “Yes,” I said, “Okay. Tomorrow, you start”, and it was that simple.
Later, he also laughed when remembering our first meeting. He would say, “When you entered the room, I got a feeling I can trust you. That’s why we did not discuss anything.” He certainly had collected several references before interviewing me, but overall he taught me that I need to delegate and trust the people I work with.
Khaduri tried to keep us deputy ministers out of politics. He was not always sharing with us when he had to balance politics and technically prudent decisions. In general, he was a person who could make brave decisions and who remained optimistic in very challenging situations.
We became friends with him later. He was respectful and loyal to his friends. In his position, he tried to balance between being a kind man and a Minister of Finance. One example is that he started his morning by checking whose birthday it was and calling people to congratulate them. In the beginning, some of the co-workers did not believe that it was Mr. Khaduri calling and believed somebody was playing a prank on them. Eventually, everybody got used to it, and it signaled that Mr. Khaduri cares about the people working at the ministry.
Perhaps finally: is there any advice you could share with current and future leaders in the Ministry of Finance or with individuals aspiring to contribute to policymaking?
DL: One good piece of advice is not to become a prisoner of short-term gains. Many times, me and my colleagues, we knew what the better thing was long-term, but we thought, “This one time, let’s make this exception because, in the short term, it will bring a bigger gain.” At that point, you do not connect the future with current events, but if you make a wrong decision for the long term, you will eventually pay. It’s amazing how things are interconnected, and for that reason, it’s best not to compromise your values and principles.
The importance of long-term thinking – that is maybe a good point to end. Thank you for the interview!
DL: Thank you, thank you very much.
